James Ooi, a market strategist at Tiger Brokers, said U.S. President Donald Trump's prediction that the war with Iran will end "immediately after" the U.S. midterm elections in November "adds another layer of uncertainty to both bond and equity markets".
Stocks in Seoul .KS11 and Taipei .TWII fell as much as 2.2% and 0.8% on the day, reversing gains from the previous session, as the net energy importers bore the heat of the escalating tensions in the Middle East.
Stocks of other net energy importers in the region such as Thailand .SETI and the Philippines .PSI also declined marginally, while those in Jakarta .JKSE and Singapore .STI also inched lower.
Malaysia's benchmark gauge .KLSE fell 0.5% to a one-week low, while the ringgit MYR= appreciated nearly 0.3% to 4.058 per dollar after weakening steadily for nearly two weeks.
Malaysia, a net exporter of crude oil and petroleum products, remains moderately exposed to higher oil prices, with export and fiscal gains helping cushion growth and inflation pressures.
"Higher oil prices tend to modestly dampen economic growth by increasing production costs and weighing on domestic activity," Barnabas Gan, group chief economist and head of market research at RHB Bank, wrote.
"However, the negative effect is partly offset by stronger oil and gas (O&G) export earnings and related economic spillovers."
Currencies were rangebound, with the MSCI gauge of emerging market currencies .MIEM00000CUS hovering just below its record high despite a modest decline.
The Singapore dollar SGD=, the Thai baht THB=TH and the Philippine peso PHP= were largely unchanged, while the Indonesian rupiah IDR= weakened by 0.2% to 17,535 against the dollar.
The South Korean won KRW=, however, strengthened against the greenback to 1,343.20, not far from its October 2024 peak of around 1,349.
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