Asian stocks mostly advanced on Wednesday despite losses on Wall Street, while oil prices declined after the United Arab Emirates announced its departure from OPEC, dealing a blow to the powerful oil cartel. U.S. futures edged higher in early trading.
Market Performance Across Asia
Markets in Japan were closed for a holiday. Elsewhere, South Korea's Kospi rose 0.3% to 6,657.40, and the Hang Seng in Hong Kong gained 1.4% to 26,029.02. The Shanghai Composite index traded 0.3% higher at 4,091.01. Australia's S&P/ASX 200 slipped 0.3% to 8,689.50. Taiwan's Taiex lost 0.6%, while India's Sensex gained 0.4%.
Oil Prices Slide on UAE Exit
The price of Brent crude oil for June delivery fell 0.5% to $110.71 per barrel early Wednesday. Brent for July dropped 0.6% to $103.74. Benchmark U.S. crude fell 0.6% to $99.32 a barrel. Before the Iran war began in late February, Brent oil was around $70 per barrel.
The UAE's departure from OPEC, effective Friday, has been closely monitored by oil markets. OPEC accounts for roughly 40% of global oil output, and the UAE is one of its largest producers. The UAE has increasingly pushed back against OPEC production quotas, seeking to sell more oil globally.
ING Bank strategists Warren Patterson and Ewa Manthey wrote in a research note: "The UAE's exit will increase oil output. The UAE has been increasingly frustrated over recent years by its output being constrained by OPEC production quotas, which have kept it well below its potential."
However, analysts noted that short-term impacts on oil prices will still depend mainly on prospects for reopening the Strait of Hormuz, where roughly one-fifth of the world's oil passed before the war. U.S.-Iran negotiations for a permanent end to the Iran war have stalled, and the waterway remains largely closed.
The UAE was the third-largest oil producer within OPEC before the Iran war. ING said its departure "will reduce OPEC's effectiveness in managing and influencing the global oil market through supply measures."
Investors Eye Fed and Iran Talks
Investors are awaiting more updates on U.S.-Iran peace talks, although limited progress has been made. Iran has offered to reopen the Strait of Hormuz if the United States lifts its blockade on its ports. So far, the U.S. appears to rule out a deal that excludes the Islamic Republic's nuclear program.
The Federal Reserve is expected to announce a decision on interest rates later Wednesday.
On Tuesday, Wall Street retreated from recent record highs. The S&P 500 fell 0.5% from its all-time high to 7,138.80. The Dow Jones Industrial Average edged down 0.1% to 49,141.93, and the Nasdaq composite dropped 0.9% to 24,663.80.
Artificial intelligence-related stocks led the losses. Chip company Broadcom lost 4.4%, Nvidia fell 1.6%, and Micron Technology lost 3.9%. Alphabet, Amazon, Microsoft, and Meta Platforms are reporting quarterly results on Wednesday.
In currency markets, the U.S. dollar rose slightly to 159.63 Japanese yen from 159.62 yen. The euro traded at $1.1708, down from $1.1712. The yield on the U.S. 10-year Treasury remained at 4.35%.
