Asia stocks mostly fell on Friday and were headed for their sharpest weekly drop in six years while oil prices were poised for their biggest jump in three in a turbulent week for global markets as the conflict in the Middle East showed few signs of easing.

In Hong Kong, the benchmark Hang Seng Index rose 37 points, or 0.15 percent, to open at 25,358.

Up north, the benchmark Shanghai Composite Index opened down 0.55 percent to open at 4,085.

The Shenzhen Component Index was 0.52 percent lower at 14,015 while the ChiNext Index, tracking China's Nasdaq-style board of growth enterprises, was down 0.6 percent at 3,197.

Investors sought the safety of cash as they sobered up to the ⁠fact that the US-Israel war on Iran could drag on longer than initially anticipated.

They also moved to price in more hawkish rate expectations from major central banks, spooked by the prospect of a resurgence in inflation if the spike in energy prices persists.

Yields on US Treasuries have shot up some 18 basis points this week, their most in nearly a year, while the US dollar was set for its largest weekly gain in 16 months.

"The range of plausible outcomes [of the war] has expanded to include both the possibility of an exceptionally constructive resolution and a highly destructive one," said Daleep Singh, chief global economist at PGIM Fixed Income.

"Markets are being asked to price a much fatter set of tails with very little reliable information about the likelihood of each, or the path in between."

The war has thus ⁠far had the biggest impact on oil prices, with Brent crude futures now trading around US$83 per barrel, having been as ⁠low as US$69 just about a week ago. ⁠US crude shot up to a 20-month high this week.

Both are set to clock a rise of more than 15 percent for the week, their largest since February 2022.

"The most market-relevant risk lies in severe escalation or direct infrastructure damage across key Gulf ⁠producers, which would likely produce sustained upward pressure on oil, feed into higher headline inflation, tighten global liquidity and materially raise recession risks," said Klay Group's senior investment team.

MSCI's broadest index of Asia-Pacific shares outside Japan last traded 0.4 percent lower and was set to fall 6.6 percent for the week, which would mark its steepest weekly drop since March 2020.

Japan's Nikkei was down 0.5 percent and on track for a 6.5 percent weekly loss, while South Korea's Kospi was also ⁠headed for its largest weekly fall in six years with a 10.5 percent slide. (Reuters & Xinhua)


Edited by Aaron Tam