Asian equities slipped on Tuesday September 1, as fresh conflict in West Asia sent oil prices climbing, stoking fresh worries over inflation and the odds of another rate increase by the Federal Reserve. The MSCI Asia Pacific Index dropped 0.2%, dragged lower by declines in South Korea and Japan. The Kospi shed 0.74%, while the Nikkei 225 fell 0.91%. The Topix bucked the trend, rising 0.12%. Hang Seng futures pointed 0.4% lower, signalling a soft open in Hong Kong.

Currency markets stayed subdued, as the Japanese yen barely moved at 159.83 per dollar and the offshore yuan flat at 6.7175. The regional weakness followed a downbeat session on Wall Street. The S&P 500 Index closed 0.3% lower on Monday August 31, even as chip stocks bucked the broader retreat.

Renewed hostilities between the US and Iran triggered the sell-off. American forces struck an island in the Strait of Hormuz, and Iran retaliated with attacks on the United Arab Emirates and Jordan, marking the first direct exchange of fire between the two sides in roughly a month. The escalation pushed Brent crude past $91 a barrel in early Asian trading, while West Texas Intermediate climbed 1% to $86.63. Traders have raised bets on a September rate rise after Federal Reserve Chair Kevin Warsh reaffirmed his focus on curbing inflation at last week's Jackson Hole gathering, sharpening attention on this week's US employment report.