Oil Prices Above $85 Push Asian Equities Lower as US Yields Hit 2007 Highs

Brent crude settled at $86.40 after OPEC+ extended output cuts through December, adding roughly 0.8 percentage points to headline inflation forecasts for South Korea, India and Thailand. Central banks in those economies now price in at least one additional 25-basis-point hike by year-end. The move reverses the modest relief Asian importers enjoyed in the second quarter when prices briefly dipped below $78. US long-term yields climbed on the combination of sticky energy costs and resilient growth data, widening the spread that draws capital out of emerging Asia. Foreign portfolio flows into regional equities turned negative for the third straight week, with net outflows reaching $1.9 billion according to exchange data. Treasury term-premium models now embed a 65 percent probability of a December hike, up from 40 percent two weeks earlier. Regional policymakers face a narrowing policy space: currency depreciation would import still more inflation while rate hikes risk choking already soft domestic demand. The IMF’s October regional outlook, due next week, is expected to trim 2026 GDP growth for Asia ex-Japan by 0.3 points on the back of these assumptions.