Asian Stocks Decline as Appetite for Risky Assets Ebbs

By Megan Cheah

Asian equities fell Monday amid waning appetite for risky assets as oil prices hovered around multimonth highs, while market participants look to the Federal Reserve's coming interest-rate decision for direction.

Traders remained cautious about possible escalation in the Middle East conflict amid hostilities between the U.S. and Iran and further attacks on Saudi Arabia's energy infrastructure.

Iran has warned that renewed U.S. and Israeli strikes would trigger a wider response targeting airports, oil pipelines and other economic infrastructure across the Persian Gulf, The Wall Street Journal reported Friday.

Yemen's Iran-backed Houthi militia hit Saudi Arabia's Shaybah oil field last week. While operations at the oil field are reportedly unaffected, the fear that escalating attacks against Saudi Arabia will see the country's oil supply and infrastructure eventually damaged is worrying the market, said Commonwealth Bank of Australia's Vivek Dhar.

Oil markets likely need to price in the risk of oil and refined product inventory depletion, with the latter having the most adverse impact on emerging and developing economies, especially in Asia, as higher income countries can outbid lower income ones, said the strategist.

However, he expects Brent oil futures would need to hit $150 a barrel before uncontrolled demand destruction would set in and slash demand in emerging Asian economies.

The December Brent crude-oil futures contract fell 1.5% to $115.01 a barrel, while the WTI contract for December delivery dropped 1.7% to $101.49 a barrel, LSEG data showed.

The surge in oil prices on Friday spooked investors, weighing on risky assets such as U.S. stocks. The losses spilled over into most Asian markets, with China's Shanghai Composite Index falling 0.5%. South Korea's Kospi was last 0.9% lower and Japan's Nikkei Stock Average dropped 0.2%. Hong Kong's Hang Seng Index was little changed, but its tech gauge fell 1.3%.

Alongside oil price concerns, markets also appear to be entering a pivotal period, with the October Federal Reserve meeting coming up this week, said MUFG Research's Lloyd Chan.

"With markets broadly expecting the Fed to keep the policy rate unchanged, the bigger catalyst should be its guidance around the policy decision," he added in a note.

The senior currency analyst reckons traders should avoid chasing U.S. dollar strength through Asian currencies broadly ahead of the Fed's meeting. "We continue to see risks of a larger oil shock. The transmission through trade balances, inflation and monetary-policy constraints should increasingly differentiate regional currencies," he said.

The U.S. dollar was last flat at 1,323.69 won and 1.2780 Singapore dollars, but 0.1% lower at 156.72 yen.

Write to Megan Cheah at megan.cheah@wsj.com

(END) Dow Jones Newswires

October 25, 2026 23:12 ET (03:12 GMT)