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Asian stocks edged lower on Wednesday, October 7, while crude oil gained as investors weighed escalating attacks between Saudi Arabia and Yemen’s Houthi movement alongside the risk of storm-related disruption to U.S. energy production. The cautious regional session followed record closes for major U.S. stock indexes, underscoring a mixed picture across markets.
MSCI’s broadest index of Asia-Pacific shares outside Japan was down 0.3% in morning trading, while U.S. crude rose to $90.38 a barrel and Brent reached $101.65, according to Reuters. Oil prices were being pulled in opposing directions: potential supply disruptions from the approaching storm and Middle East conflict on one side, and increased crude shipments from the region on the other.
Regional shares diverge from Wall Street
The S&P 500 and Nasdaq both closed at record highs on Tuesday, rising about 0.6% and 0.45%, respectively. The Dow Jones Industrial Average advanced 0.5%. The MSCI Asia-Pacific index excluding Japan remained 1.5% higher for October to date despite Wednesday’s decline.
Trading across the region was uneven. Japan’s Nikkei fell 0.86%, Hong Kong’s Hang Seng was down 0.63% in early trading, and Australian shares were roughly flat. Hong Kong’s decline was accompanied by a 4% fall in its biotechnology index. Mainland Chinese markets were closed for a holiday.
The dollar index rose 0.03% to 101.94 after falling 0.27% in the previous session. The yen weakened 0.19% to 158.43 per dollar, while sterling slipped 0.08% to $1.3262. Reuters reported that movements in Treasury yields, oil and the euro were among the factors affecting the dollar.
Oil faces competing supply signals
The oil market was assessing the possibility that a storm forming in the Gulf of Mexico could disrupt U.S. production and refining. Reuters, citing U.S. forecasters, reported that the storm could become the first Atlantic hurricane of 2026 within two days and was likely to affect oil and gas facilities. Offshore areas in its projected path account for about 15% of U.S. crude production and 5% of natural gas output.
At the same time, flows of Middle Eastern oil have increased. Vitol chief executive Russell Hardy said about 12 million barrels a day of crude and 2 million barrels a day of refined products had left the region on tankers over the preceding seven to 10 days. Saudi Energy Minister Prince Abdulaziz bin Salman said the kingdom’s East-West pipeline had reached 5.8 million barrels a day, a further indication of higher supply.
Fresh security risks complicate that picture. Saudi Arabia’s aviation authority said airports in Jazan and Najran were targeted on Monday evening as fighting intensified. Reuters separately reported that Saudi-backed Yemeni government forces were advancing in an offensive to retake territory from the Houthis, while Riyadh increased airstrikes in support of the campaign.
Conflict puts shipping routes and infrastructure in focus
The attacks are part of a wider escalation around the Bab el-Mandeb Strait, a passage linking the Red Sea and Gulf of Aden. The Associated Press reported that Saudi Arabia and Yemen’s internationally recognized government launched a campaign aimed at driving Houthi forces from the strategic waterway. The Houthis have claimed attacks on Saudi sites, including an Aramco refinery and military facilities; those claims should be distinguished from independently confirmed damage.
The strait is a significant route for global commerce. AP reported that about 12% of world trade, including roughly one-quarter of global container traffic, passes through the narrow waterway on routes connecting Europe and Asia via the Suez Canal. The conflict therefore raises concerns beyond Saudi infrastructure, particularly for shipping and oil flows that depend on secure regional routes.
The Yemeni conflict has deep roots: Houthi forces seized the capital, Sanaa, in 2014, and a Saudi-led coalition intervened the following year in support of Yemen’s government. A ceasefire reached in 2022 was largely observed until renewed advances and fighting this summer, according to AP. The latest offensive and attacks mark a further deterioration, but the immediate scale of any disruption to oil exports remains uncertain.
Investors watch yields and upcoming U.S. data
Bond markets and U.S. interest-rate expectations were also in focus. The yield on 10-year U.S. Treasuries rose back to 5.3% in Asian morning trading, ahead of a 10-year Treasury auction later Wednesday and a 30-year auction on Thursday. Analysts cited by Reuters said the sales would provide a test of investor demand for U.S. government debt.
Investors were also awaiting publication of minutes from the Federal Reserve’s September 15–16 meeting. Reuters reported that traders had reduced the probability they assigned to a rate increase this month to 19%, from about 50% a week earlier. The minutes could offer further detail on policymakers’ discussion, but the report did not establish what the Fed will decide next.
For energy markets, the immediate balance remains between possible weather-related supply interruptions, escalating regional hostilities and evidence of substantial Middle Eastern shipments. For Asian equities, Wednesday’s modest declines came even as U.S. shares set records, with investors also monitoring bond yields and the next signals from the Federal Reserve.
