Asian shares fall, oil prices rise as Iran war talks stall

Stock markets across Asia fell on Tuesday while oil prices climbed, as efforts to end the Iran war appeared to lose momentum again.

Despite a fragile ceasefire, the Strait of Hormuz remains largely closed, disrupting a key route for global oil supplies. Many Asian economies, especially resource-dependent Japan, rely heavily on this passage for energy imports.

Japan's benchmark Nikkei 225 dropped 1.1% to 59,884.12 after the central bank kept its key interest rate unchanged at 0.75%.

The Bank of Japan said the economy continues to grow at a moderate pace but warned of a likely slowdown as rising oil and commodity prices linked to the war increase costs. The decision by its policy board was split 6-3, reflecting differing views among members. Pressure has been building for Japan to gradually raise interest rates after years of keeping them near zero to tackle deflation.

"There are various risks to the outlook," the central bank said, noting that developments in the Middle East remain a key concern.

Elsewhere in the region, South Korea's Kospi rose 1% to 6,683.10. Hong Kong's Hang Seng fell 0.7% to 25,751.04, while China's Shanghai Composite declined 0.2% to 4,078.77. Australia's S&P/ASX 200 lost 0.6% to 8,717.80.

Oil prices continued to rise. Brent crude for June delivery increased by $1.11 to $109.34 per barrel. The more actively traded July contract rose $1.08 to $102.77. Before the war, Brent was trading near $70 per barrel but has at times surged close to $120. US benchmark crude also rose 96 cents to $97.33 per barrel.

Investors are now awaiting interest rate decisions from the US Federal Reserve, the European Central Bank and the Bank of England later this week.

On Monday, US markets showed modest gains. The S&P 500 edged up 0.1% to a record high of 7,137.91, following weeks of strong performance driven by solid corporate earnings and hopes that the global economy can withstand the impact of the war.

The Dow Jones Industrial Average slipped 0.1% to 49,167.79, while the Nasdaq composite rose 0.2%.

Market attention is also focused on upcoming earnings reports from major tech companies, including Alphabet, Amazon, Meta Platforms, Microsoft and Apple.

In the bond market, US Treasury yields rose slightly alongside oil prices. The yield on the 10-year Treasury increased to 4.33% from 4.31% late Friday.

In currency trading, the US dollar weakened slightly to 159.04 Japanese yen from 159.42 yen, while the euro dipped to $1.1716 from $1.1720.