Asian Stocks Regain Ground Despite Escalating West Asia Conflict As Crude Spike Softens

Asian stocks pared early losses on Friday after the conflict between Iran and Israel escalated, with US President Joe Biden weighing to support further Israeli strikes.

The Japanese benchmark Nikkei 225 was 180 points or 0.47% higher at 38,732, while Australia's S&P ASX 200 was 67 points or 0.82% lower at 8,137 as of 08:45 a.m. Hang Seng jumped over 2% on Friday after a brief pause in the previous trade.

Crude oil prices sored after President Joe Biden, told reporters the US was discussing whether to support potential Israeli strikes against Iranian oil facilities. “We’re discussing that. I think that would be a little, anyways,” Biden said.

Meanwhile, Israel said it bombed more than a dozen Hezbollah targets in Beirut on Thursday. This was in retaliation to Iran, launching approximately 200 ballistic missiles towards Israel on Tuesday for Israel’s killing of Hassan Nasrallah, leader of the Tehran-backed Lebanese militant group Hezbollah, on Sept. 27.

During Thursday's session, Brent crude went up 5.03% to $77.62 a barrel. There will be a cap on oil prices for now, said Richard Harris Fund Manager, Port Shelter Investment Management.

The big move in China is in reaction to the policy news, he said. "People have been so underweight on China that they hurried buying before the market closes for the golden week." India still looks interesting from a foreign investor's perspective, he said.

The Chinese stock market will be closed for its Golden Week festivities. After a record-breaking rally last week, China regained the influence it lost for over 10 months in the MSCI Emerging Market index.

Elsewhere, stocks in the US struggled to gain traction even though the latest data showed that the services sector in September expanded at the fastest pace since February 2023. The US September ISM services PMI rose to 54.9 versus the estimate of 51.7.

In another set of data, US unemployment benefits rose slightly last week. The weekly jobless claims rose by 6,000 to 2.25 lakh, which was above the Bloomberg estimate.

The S&P 500 and Nasdaq Composite slipped 0.17% and 0.04%, respectively. The Dow Jones Industrial Average declined by 0.44%.

The September US jobs report will be released on Friday, which will be crucial for the Federal Reserve's next rate cut direction. The unemployment rate is expected to hold steady at 4.2%, according to Bloomberg.

Traders will keep an eye out for the S&P Global PMI figures for Hong Kong, inflation in the Philippines, and retail sales in Singapore.