GLOBAL MARKETS-Asian markets tumble as US-Iran fighting lifts oil and bond yields

Stocks slumped in Asian trading on Wednesday as a bond market-induced selloff on global markets spilled over into the region, after renewed attacks by the U.S. on Iran pushed oil ‌prices higher. MSCI's broadest index of Asia-Pacific shares outside Japan tumbled 1.5% as South Korea's KOSPI dropped more than 3%, while the Nikkei 225 was down 2.6%. S&P 500 e-mini futures were down 0.1%.

Brent crude futures extended gains into a second day as trading resumed in Asia, rising 1.3% to $95.91 a barrel after the U.S. ‌launched a barrage of airstrikes on Iran on Tuesday, which earlier pushed oil prices to a five-week high. "The threat of further disruptions to ‌the Strait of Hormuz has brought about renewed anxiety over inflation, driving a selloff in stocks across most major markets and a rout in global bond markets," Westpac analysts wrote.

The yield on the U.S. 10-year Treasury bond hit an intraday high of 4.8122%, its highest level in almost three years, while the yield on the 5-year Japanese government bond rose to 2.295%, its ⁠highest level ​on record. "September kicked off on a ⁠shaky note as developed market government bonds continued to sell off," DBS analysts wrote.

"Brace for a volatile month ahead as high yields cause angst across the asset classes," they added. "If ⁠the bond rout does not get stemmed, policymakers would probably have to resort to more aggressive measures to cap yields." The kiwi dollar was down 0.6% at $0.5855 after the Reserve Bank ​of New Zealand hiked interest rates by 25 basis points to 2.75%, as expected by markets, though dovish language in the central bank's ⁠statement weighed on the currency.

The U.S. dollar index, which measures the greenback's strength against a basket of six currencies, was up 0.1% at 99.79, its highest since August 17. Overnight on Wall ⁠Street, ​the S&P 500 slipped 0.7% and the Nasdaq Composite fell 1% as a surge in government bond yields weighed on equities.

The declines came as data from the Institute for Supply Management released on Tuesday showed U.S. manufacturing activity moderated in August amid a slowdown in new orders, but remained in ⁠expansionary territory. Traders believe that the Federal Reserve is likely to lift interest rates at its next meeting in two weeks, though a hike is not ⁠certain.

Fed funds futures are pricing an ⁠implied 67% probability of a 25-basis-point increase to benchmark borrowing costs at the U.S. central bank's two-day meeting ending on September 16, compared to a 39.6% chance a week ago, according to the CME Group's FedWatch tool. Gold was down ‌0.8% at $4,295.70 an ounce, ‌while bitcoin slipped 0.6% to $76,979.55 and ether was 0.9% lower at $2,397.78.