Singapore: Asian stock markets rose on Monday, led by technology shares, as investors responded to stronger US economic data and continued optimism about global growth. At the same time, rising oil prices linked to the conflict between the United States and Iran increased concerns about inflation and interest rates.
Brent crude rose to about $97 a barrel, while US West Texas Intermediate crude moved above $92. Oil prices were supported by a new escalation between the United States and Iran involving vessels in and around the Strait of Hormuz.
The latest rise in oil prices has increased concern that the conflict could cause a longer disruption to energy supplies. The Strait of Hormuz is one of the world's most important routes for oil shipments, and lower shipping activity through the waterway has increased concerns about possible supply disruptions.
Iran has said it plans to announce an exclusion zone outside the Strait of Hormuz. The plan followed US strikes on three Iranian oil tankers after Iranian attacks on US warships in the region.
The US military has denied an Iranian claim that Iran struck an unmanned US military vessel in the Strait of Hormuz, calling the allegation false. The competing claims underline the uncertainty surrounding the latest military developments.
Shipping activity through the strait has also fallen sharply. Shipping data showed a 10 day average of about 10 commodity ships a day on September 6, the lowest level since May.
The decline in shipping has increased concerns about possible disruptions to energy supplies. The waterway is a major route for oil shipments to international markets, making any prolonged reduction in traffic important for the global economy.
The rise in crude prices could also increase the cost of petrol, diesel, transport and production. Diesel prices are particularly important because they affect trucks, ships, agriculture and industries that depend heavily on fuel.
This has made the Iran conflict an increasingly important inflation story for the global economy.
At the same time, Asian shares received support from a stronger than expected US jobs report and continued optimism about technology companies.
Japan's Nikkei rose about 2 percent, while South Korea's Kospi gained more than 4 percent. Semiconductor companies were among the strongest performers, with major South Korean chipmakers recording sharp gains.
Chinese blue chip shares also moved higher. China is planning a major capital strengthening programme for eight large financial institutions, with the institutions set to raise or receive a combined 360 billion yuan.
The Ministry of Finance will issue 300 billion yuan in special treasury bonds to support the replenishment of core Tier 1 capital at eight state owned financial enterprises. The measure is intended to strengthen their financial position and ability to withstand risks.
The Chinese government has described the measure as a way to strengthen financial institutions and improve their ability to support the wider economy.
The US jobs report has also changed expectations about interest rates.
US employers added 162,000 jobs in August, while the unemployment rate remained at 4.1 percent. The figures were stronger than many investors had expected and increased expectations that the Federal Reserve could raise interest rates at its meeting on September 15 and 16.
However, a rate increase has not been confirmed.
The next major test for markets will be US inflation data due on September 11. Investors will closely examine the figures for signs that higher energy prices are beginning to add to inflation.
Other central banks are also facing difficult decisions.
The European Central Bank is due to announce its latest monetary policy decision on September 10. Markets expect higher interest rates, although the decision has not yet been made.
The Bank of Japan will meet on September 18, with investors also watching for signs of a possible increase in interest rates.
The combination of stronger economic data and higher energy prices is creating a difficult environment for central banks. Stronger economic activity can reduce pressure for rate cuts, while higher oil prices can add to inflation.
For consumers, the impact could extend beyond fuel prices. More expensive energy can raise the cost of transporting food and goods, producing products and providing services.
For businesses, higher borrowing costs combined with higher energy expenses could put pressure on profits and investment.
Financial markets are therefore balancing two very different forces. Technology shares and stronger economic expectations are supporting equities, while the conflict in the Gulf and rising oil prices are increasing fears about inflation and tighter monetary policy.
The direction of oil prices will remain closely linked to developments around the Strait of Hormuz. If shipping disruptions continue, energy markets could face further pressure. If tensions ease and shipping returns to normal, some of the current pressure on oil prices could decline.
For now, investors are watching the conflict, oil markets and the next round of inflation data closely. The outcome of those developments could determine whether the current technology led rally in Asian markets can continue or whether rising energy costs begin to weigh more heavily on the global economy.