Vietnam and four European nations outside the EU signed a free trade agreement in Hanoi on Sunday, seeking to diversify their markets as US tariffs disrupt global commerce.

The deal, between Southeast Asia’s fastest-growing economy and the European Free Trade Association (EFTA), which includes Iceland, Liechtenstein, Norway and Switzerland, eliminates or reduces customs duties, including on imports of industrial, fish and agricultural products.

The deal was signed in the capital in the presence of Vietnam’s top leader To Lam and representatives of EFTA governments.

Vietnam said the agreement showed the parties’ resolve to “reinforce the rules-based trading system amid continued volatility in the global economy”, according to a government statement.

It was also expected to help Vietnam “diversify its import and export markets” and “integrate more deeply into global value chains”, the government said. Vietnam and EFTA concluded negotiations in July, more than a decade after the free trade talks officially began in 2012.

The parties relaunched negotiations in September last year, after they had stalled since 2018.

The agreement followed a global trade-disrupting tariff blitz by the United States under President Donald Trump which has left Vietnam with a hefty tax on its US exports amid ongoing negotiations with Washington.

Experts say the new deal reflected a shared initiative to diversify commercial ties and reduce reliance on major trading partners.

“As the US increasingly exerts trade pressure on European countries, the agreement is a joint effort to turn economic integration into greater strategic autonomy and to develop alternative commercial relationships rather than relying exclusively on their largest partners,” history and politics scholar Do Dinh Lam Khang told AFP.

For Vietnam, closer ties with EFTA economies could support its ambition to move into higher-value-added activities, Khang added.

The agreement covers trade in goods and services, intellectual property rights, trade remedies and sustainable development, among other areas, both parties say.

Bilateral trade between the EFTA and Vietnam last year was valued at 4.8 billion euros ($5.4 billion), according to the association.

Electrical and mechanical machinery, fish and pharmaceutical products were the EFTA nations’ top exports to Vietnam last year.

Machinery, footwear and apparel were manufacturing hub Vietnam’s major exports to the EFTA.

The association was created as a counterpart to the European Economic Community, precursor of the European Union which its four member states are close to but have not joined.

Last week's meetings of the International Monetary Fund and World Bank yielded no new answers for the developing world to the questions posed by a spreading West Asia war, continuing war in Ukraine, rising debt payments and a potential AI bubble.

Not for the first time, lower-income countries are being rocked by the spillover from the actions of wealthier nations: rising debt service costs, higher inflation and the risk of falling ever further behind economically thanks to the AI boom.

What they got was the stock advice the global lenders always dish out: to shrink fiscal deficits and accelerate economic reforms to attract more private sector investment.

Kristalina Georgieva, the first IMF chief from a developing nation - Bulgaria - said advanced economies were in fact the worst offenders on budget imbalances. She noted that developing countries' debt levels had actually fallen in recent years, only for surging bond yields elsewhere to drive up their borrowing costs.

Average debt service payments there had more than doubled from a decade ago to 14 percent of government revenue, crowding out education, healthcare and other critical areas, she said.

Advanced Economies Focused on Their Own Problems

At a panel on Saturday, Georgieva said many issues remained unresolved, especially around AI:

"We are in a place where we have many more questions than we have answers. And my alert to everybody is: Do not fall for the guys that pretend they have the answers. They are tricking you."

Josh Lipsky, vice president of international economics at the Atlantic Council think tank, said the meetings had flunked their opportunity to come up with guidance or ways to help.

"It's hard to talk about the developing world when the advanced economies don't have their act together and are at risk of a fiscal crisis," he said. "And that's on top of political situations in many of these countries that makes development aid not a priority at the moment."

Mauricio Cardenas, Colombia's former finance minister and now a research scholar at Columbia University's School of International and Public Affairs in New York, said many policymakers were left with a deep sense that "something really bad could happen" but no real roadmap to navigate the future.

"The IMF and World Bank are not particularly well prepared for this new phase. They understand that something is going on, they bring in experts on AI," he said. "But in the end, there's no kind of specific, concrete advice on how to be prepared for something where you don't really understand how it's going to unfold."

The geopolitical tensions that have roiled both institutions since Russia's invasion of Ukraine in 2022 - complicating concerted action - were also evident in Bangkok when nearly half the delegates at an IMF steering committee walked out when Russia's finance minister spoke.

Houthi attacks on Riyadh airport delayed the arrival of the head of that committee, Saudi Finance Minister Mohammed Al-Jadaan, who had to travel overland to Qatar to catch a flight.

And Bangkok itself was a stark reminder of the challenges facing developing countries, still partly under water after floods in September that caused almost $200 million in damage to Thailand's industrial sector.

Rising Inequality Could Raise Costs in Long Term

Kate Pickett, a professor at the University of York, urged policymakers to focus on more inclusive growth rather than forcing developing countries into tough structural reforms.

"If inequality increases, if poverty deepens, that will increase their costs in the long term," she said. "It's not enough to describe an economy as resilient. It's only resilient for the rich and the privileged.”

Ayhan Kose, deputy chief economist at the World Bank, said the global economy had weathered its biggest energy shock - from the US-Israeli war on Iran - better than expected.

But while a global recession had been avoided, he said growth outlooks in both developing and advanced economies were worse than before.

Growth had already fallen off in half of advanced economies, while in developing countries as a whole, it had slowed significantly to around 3.6 percent from 4.4 percent.

“People are really worried because resilience today is not a guarantee for resilience tomorrow," he said. "Now they are worried about what will be the next shock, because every six months, if not every three months, there is a new shock."

While no specific initiatives were announced, he said the World Bank remained focused on helping developing countries prepare for advancements in AI, in part by mobilising more private capital, now at triple the levels of 2022.

Yet it, too, has to contend with sharp drops in official development aid and persistent challenges in attracting foreign investment to developing countries.

“The reality on the ground is the reality on the ground,” he said.

US Secretary of State Marco Rubio is set to visit India for the second time this year, as Washington seeks to bolster ties with a strategic partner despite months of friction over a trade deal.

Rubio will meet senior Indian officials, but will bypass the Indian capital during the trip in the coming week.
Instead he will focus on investment and energy during visits to financial hub Mumbai and India’s oil hub of Jamnagar, which is home to billionaire Mukesh Ambani’s refining complex, the world’s largest.

The elephant in the room will be the inability by both countries to seal their long-awaited trade deal, experts say.

Several factors, including US President Donald Trump’s tariff blitz, friction over energy imports and Washington’s warmer ties with India’s arch-rival Pakistan have made it harder for negotiators to clinch an agreement.

Rubio will start his six-day overseas trip on Saturday with a visit first to Uzbekistan before arriving in India, according to the US State Department.

Here are some of the challenges the trade pact has faced and the road ahead.

WHY HAS THE DEAL BEEN DELAYED?

India and the United States agreed in February on the framework for an interim deal under which Washington would lower reciprocal tariffs from 25 percent to 18 percent and India would reduce duties on a range of industrial and agricultural goods.

Despite months of negotiations, the agreement has not yet been finalised and signed.

One reason is the legal uncertainty surrounding Trump’s tariff plans after court challenges undermined the reciprocal tariffs that formed their basis.

“The February framework had offered to reduce India’s reciprocal tariff... in return for substantial Indian concessions. Once that tariff regime was struck down, the value of the US offer became unclear,” trade expert Ajay Srivastava said in a note.

India is also wary of new trade measures by Washington that could impact it, including an investigation into alleged unfair practices in several countries and a new law that allows for up to 100 percent tariffs on nations that purchase Russian oil.

Trump on Friday signed an executive order that waived those threatened sanctions.

WHERE DO NEGOTIATIONS STAND?

Progress appears to have hit several hurdles.

For the better part of this year, both governments spoke optimistically about the possibility of finalising the interim deal.

US ambassador to India Sergio Gor in June said negotiators were working on the “last one percent” of the pact.

More recently, the tone has turned markedly cautious.

India’s Finance Minister Nirmala Sitharaman said last week that talks had hit a “plateau”, with little room for further concessions.
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Her remarks came days after US Trade Representative Jamieson Greer said an announcement was not “imminent”.

WHAT HAVE BEEN THE MAIN STICKING POINTS?

Agriculture remains a sensitive area for India, which is reluctant to expose farmers to greater foreign competition.

Washington, meanwhile, wants India to buy more US energy supplies.

New Delhi has also insisted that its final tariff rate should be competitive with those received by other regional manufacturing rivals such as Vietnam.

Indian trade minister Piyush Goyal said this week that the first tranche of the deal was in its final stages, but added that it would not be operational until India secured an edge over its competitors.

“It’s going through the final contours, the legal drafting, and we hope to be able to finalise that soon and operationalise that once we get competitive advantage over our peer countries,” he said.

HOW HAS TRADE BEEN HOLDING UP?

Goods exports to the US jumped 21 percent in August to $8.3 billion compared to the same month a year earlier, when India faced 50 percent tariffs.

The surge in exports has been a bright spot for the Indian economy, which has been roiled by high energy prices due to war in the Middle East.

If higher tariffs were to return, economists say it would cast a shadow on India’s growth outlook, hurt market sentiment and heap pressure on an already-weak rupee.

The US budget deficit grew to almost $2 trillion over the past year, government data showed Friday, reaching its highest level since 2021 despite President Donald Trump’s promises to cut public spending.

The expansion comes amid growing worries over the massive $40.3 trillion US debt load and rising inflation, as the cost of borrowing climbs.
Refunds of Trump’s tariffs after they were overturned have further fueled the budget gap.

The federal deficit, which occurs when government spending exceeds its revenues, rose to $1.99 trillion in fiscal year 2026, the Treasury Department said. This marked a 12-percent increase from the prior year, when the shortfall came in at $1.78 trillion.

A key driver of expenditures was the rising interest paid on public debt, which jumped $144 billion to a record $1.36 trillion.

Interest costs on around $32 trillion in publicly held US debt have been ballooning in recent years, and climbing bond yields have sparked further concerns.

Treasury bond yields, which influence interest rates for mortgages and auto loans, have jumped this year, with steeper borrowing costs adding to pressures that US voters face ahead of November’s midterm elections.

Meanwhile, an expected influx of revenue from Trump’s sweeping tariffs have failed to fully materialize during his second term.

The Supreme Court struck down his global duties in February, triggering a wave of refunds. Treasury data released Friday reflected $145 billion in customs refunds over the year -- primarily due to tariffs -- erasing significant gains from Trump’s duties.

Overall, government revenues climbed by three percent to $5.40 trillion in the latest fiscal year, which ended September 30.

But spending was much higher, rising by six percent to $7.40 trillion.

The deficit will likely be similar for the next year, said Nancy Vanden Houten of Oxford Economics.

But she warned “the risk may be for a larger budget gap if the war with Iran persists well into the fiscal year.”

The Trump administration has pledged to cut deficits and government spending since he returned to the White House last year.

Besides slashing the federal workforce and foreign aid, the Republican-controlled Congress pushed through cuts to the Medicaid health insurance scheme and moved to shrink the federal food assistance program too.

But they also extended expiring tax cuts and provided fresh funding for Trump’s migrant deportation drive.

The latest data released Friday showed that upticks in tax collection from individuals and customs revenues were offset by higher refunds and lower corporate tax collection.

Among other sectors, spending on defense military programs increased by $48 billion, or six percent, over the year to $917 billion.

Taken together, a Treasury official estimates the US deficit-to-GDP ratio is around 6.2 percent, up from 5.8 percent last year.

This stands in contrast to Treasury Secretary Scott Bessent’s previously stated goal of bringing the deficit down to three percent of GDP, alongside other targets like spurring economic growth of three percent.
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The latest budget figures come less than three weeks before US midterm elections, where Trump’s Republican party is fighting to retain control of Congress.

Ahead of the crucial vote, both Republicans and Democrats have raised ideas that could widen the budget shortfall further.

Trump recently promised $5,000 to every American adult if Republicans maintained control of Congress, a plan that would cost over $1 trillion.

Democrats say they are looking to reverse Medicaid cuts and revive health care tax breaks.

US President Donald Trump has waived key sanctions and tariffs targeting Russian exports a day before they were due to take effect, providing potential economic relief to major buyers of Russian energy, including India and China.

In an executive order, Trump said the waiver was in the national interest of the United States. The decision suspends the implementation of the measures rather than permanently repealing them, leaving the administration with the option of enforcing them later, says NDTV.

"I am hereby waiving the application of such sanctions, restrictions, and duties provided for in the Graham Act. I have submitted to Congress a certification that the issuance of such a waiver at this time is in the national interest of the United States," Trump stated in the executive order.

The waiver came shortly before the 18 October deadline under the legislation.

Sanctions legislation

The Lindsey O Graham Sanctioning Russia and Iran Act of 2026, passed last month, was designed to restrict financial resources supporting Russia's war in Ukraine by targeting Russian officials, financial institutions, energy interests and foreign partners supporting Moscow's military operations.

The legislation provided for tariffs of up to 100% on goods from the five largest buyers of Russian crude oil: China, India, Slovakia, Hungary and Azerbaijan. It also proposed tariffs of 500% on US imports of Russian energy products and direct sanctions against Russian President Vladimir Putin, senior government officials and key Russian entities.

The measures could have exposed up to 10 countries to tariff threats.

India defends energy policy

The proposed 100% tariff on Indian goods would have been added to an existing 10% US tariff imposed over forced-labour concerns, according to the information provided.

The move would have followed earlier trade tensions between Washington and New Delhi over India's purchases of Russian crude. An additional 25% tariff on Indian imports had previously been imposed over those purchases before being removed in February 2026 under a US-India trade framework.

Before the waiver, India had reiterated its determination to protect its trade and economic interests.

"As stated on several earlier occasions, India remains firmly committed to ensuring energy security for its 1.4 billion people. It will continue to do so through diversified sourcing and based on evolving market dynamics," India's Foreign Ministry said.

The ministry also warned of potential consequences for bilateral ties and global energy markets.

"The potential consequences of oil tariffs for not just the bilateral relationship but also the international energy market have been very clearly articulated by the Indian side," it said.

US-Russia energy ties and Ukraine war

The waiver comes alongside a reported agreement for Russia to supply more than 300,000 tonnes of diesel to the United States immediately, with further shipments planned.

Ukrainian President Volodymyr Zelensky criticised the transaction, describing it as "unworthy of our partners" and a "weak decision". He also said Moscow was expressing "thanks" for the deal while continuing its attacks on Ukraine.

Trump has also criticised Zelensky's handling of negotiations to end the war.

"I suggest they get a new leader who can make a deal. For some reason (Zelensky) never does," Trump said.

International Monetary Fund chief Kristalina Georgieva said today (17 October) this year's Annual Meetings with global policymakers were marked by "optimism and worry" about the global economic outlook as the event wound down in Bangkok.

Georgieva also said her organisation had a "responsibility" to help low-income countries struggling with price shocks stemming from the US-Israel war on Iran.

Meetings in the Thai capital this week brought together finance ministers, central bank chiefs and other top officials from around the world, with surging inflation, spiking bond yields and economic growth driven by artificial intelligence at the top of the agenda.

"(The meetings) were marked by both optimism and worry," said Georgieva, who was speaking at a press briefing alongside Saudi Finance Minister Mohammed al-Jadaan.

"Optimism from the resilience of the global economy, the promise of AI, the dynamism of Asia. But AI is also recognised to be a source of worry, and so are inflation, high levels of debt, wars, and climate risks."

All week, the IMF has warned that high levels of debt and rising bond yields in advanced economies are tightening financial conditions just as central banks need to focus on bringing inflation down, likely by increasing interest rates.

Global energy prices have spiked since late February, when the United States and Israel launched the war on Iran, with Tehran's retaliatory actions targeting Washington's Gulf allies and curtailing oil and gas supplies.

The price increases have rippled across the globe, fuelling inflation in economies across a range of income groups.

The most vulnerable to the shock, the IMF has said, are low-income oil-importing countries that are not exposed to the boom in AI investment that has propped up growth in many advanced economies.

"I can tell you that people everywhere, but especially in poorer countries, they don't like inflation. Inflation is like a tax on the poor," said Georgieva.

She said such countries needed to set spending targets such that they prioritised growth and protecting the most vulnerable people, adding that the Fund had a "relentless pursuit of more resources for low-income countries".

Higher global interest rates and bond yields, however, were driving up debt repayments for low-income countries, she said.

The share of debt repayments as a percentage of government revenue had gone up from eight to 14% for low-income countries in recent years, the IMF chief said.

She said her organisation had a responsibility to help countries to restructure debt if needed; to assist with domestic resource mobilisation; to bring in international finance; and to create conditions for private investment.

"When we do our best, it translates into better lives for people."

On the AI investment boom, Georgieva said that member countries had recognised its value in propping up growth, but "when we are dependent on one particular driver of growth, it is like we stand on one leg".

A key debate at this year's meetings has been on whether the technology's most advanced frontier models require regulation and guardrails.

The question has grown more urgent after recent revelations of security incidents involving autonomous AI agents.

Georgieva said she was "impressed" by the spirit of cooperation between AI companies, governments and other stakeholders that she witnessed in Bangkok on the issue.

Singapore’s economy grew more than 5 percent in the most recent quarter, continuing an AI-fuelled boom that has made the city-state one of the fastest-growing advanced economies.

Gross domestic product (GDP) grew 5.4 percent year-on-year between July and September, down from a 6.2 percent expansion in the second quarter, according to advance government estimates released on Wednesday.

Manufacturing, which is dominated by the city-state’s semiconductor industry, grew 7.5 percent, according to the estimates from the Ministry of Trade and Industry.

Increased output in “electronics, precision engineering, transport engineering and general manufacturing clusters” drove growth, the ministry said, offsetting declines in the chemicals and biomedical sectors.

Construction, including AI-related investments such as data centres, expanded 8.8 per cent, according to the figures.

Despite the heady expansion, Singapore’s central bank left its monetary policy settings untouched in its latest announcement on Wednesday, citing expectations that AI demand will cool in 2027.

The Monetary Authority of Singapore, which manages monetary policy through currency exchange rates rather than interest rates, said it expected core inflation to average 1.5–2.0 percent in 2026.

“Global AI-driven growth is expected to ease in the latter half of next year from its current exceptional pace, while higher interest rates, amid elevated inflation in the advanced economies, would weigh on final demand growth,” the central bank said in a statement.

Singapore is a major global player in the booming chip sector, a position that has helped it weather choppy economic conditions, including the energy shock prompted by the US-Israel war on Iran.

The Southeast Asian city-state accounts for roughly 10 percent of global semiconductor output and 20 percent of semiconductor equipment production, according to government figures.

Yeow Hwee Chua, an assistant professor of economics at Nanyang Technological University, described Singapore’s economic performance as “impressive for a high-income economy, especially given the uncertain global environment”.

“The global technology investment boom has been an important driver,” Chua told Al Jazeera.

“Strong demand for electronics has supported manufacturing and related wholesale trade, illustrating how Singapore benefits from its position in global supply chains,” he said.

Singapore’s economy is expected to grow 5 percent in 2026, according to the IMF’s latest economic forecast, faster than any other advanced economy except Taiwan.

The city-state’s GDP grew 5 percent in 2025, its second straight year of growth above 5 percent – the first such streak since 2010 and 2011.

The International Monetary Fund (IMF) has warned that low-income, energy-importing countries outside the artificial intelligence (AI) value chain are falling further behind, having been vulnerable to begin with.

Speaking at the closing press briefing of the IMF-World Bank Annual Meetings in Bangkok on October 17, IMF Managing Director Kristalina Georgieva said discussions were marked by both optimism and worry.

Mohammed Aljadaan, chair of the International Monetary and Financial Committee (IMFC) and Saudi Arabia's finance minister, said: “There is no room for complacency.”

Asked about calls for fiscal consolidation when poorer countries' needs are rising, Georgieva said the work starts at home: well-calibrated policies, fair revenue collection and spending that protects the most vulnerable and supports growth.

She added that the IMF does not see a need for dramatic adjustment in many low-income countries, crediting them with putting debt on a downward path.

Debt-to-GDP ratios are rising in rich countries and falling slightly in low-income ones, she said. Yet higher inflation and interest rates have pushed debt payments in low-income countries from 8 percent to 14 percent of revenue in recent years.

Georgieva said recent decisions on the IMF’s concessional lending vehicle, the Poverty Reduction and Growth Trust, allow the IMF to more than triple concessional lending compared with before the reform.

Ten partners—France, Germany, Ireland, Italy, Japan, Kazakhstan, Luxembourg, the Netherlands, Spain and Switzerland—committed over $100 million for capacity development.

Members also reaffirmed support for timelier, more predictable and coordinated debt restructuring, including through the G20 Common Framework.

Georgieva urged central banks to stay “laser-focused” on price stability, noting that inflation remains stubborn and rising interest rates are adding to debt-service pressure. “Inflation is like a tax on the poor.”

On AI, she said the boom is the main support for the global economy but also a risk because dependence on one growth driver is “like we stand on one leg.”

The IMF managing director said policymakers want guardrails to protect people and businesses.

She also said regulators should watch risks from rising leverage, non-bank financial institutions, cyberattacks and fraud, and noted that Thai authorities led members towards the Bangkok Blueprint, a step towards a framework for digital finance.

Georgieva cited the dynamism of Asia among the sources of optimism. She held up host Thailand, now integrated into the global AI supply chain, as proof that good policies and strong institutions can expand opportunities.

She named no South Asian country, but her description of energy-importing economies outside the AI value chain is one that many in the region will recognise.

Georgieva also congratulated Aljadaan on his one-year extension as IMFC chair.

On monetary policy, Aljadaan said central bank independence is essential to price stability and policy credibility. He said AI could widen economic disparities, especially in low-income countries and fragile states.

Brent touched $110 a barrel for the first time since May on Friday on worries that escalating tensions in the Middle East could further tighten supplies, while investors assessed how much diesel Russia could supply to the global market.

Brent crude futures settled $3.94, or 3.7 percent, higher at $109.86, the highest since May 19, while US West Texas Intermediate crude futures closed $3.44, or 3.5 percent, higher at $101.41, the highest since September 17.

So far this week, Brent has risen 4.9 percent and WTI 10.4 percent. “WTI and Brent reversed earlier losses as escalation fears resurfaced amid rumours of attacks on Saudi energy infrastructure,” research and consultancy Energy Aspects said in a note.

Israeli reports suggest Iran may be preparing a pre-emptive strike following unusual military movements detected by Western intelligence.

Although unverified, these developments reinforce our view that persistent escalation risks will keep flat prices supported,” Energy Aspects added. A Saudi-led coalition said it intercepted and destroyed a ballistic missile launched towards the Red Sea city of Yanbu.

The port is critical for Saudi Arabia’s efforts to bypass the Strait of Hormuz and keep oil flowing to international markets.

Initial reports indicated no damage to Yanbu’s infrastructure, consultants Rapidan Energy Group said.

Supply concerns also increased as attacks around the Strait of Hormuz surged over the past 10 days,

with Iran saying it was stepping up strikes in response to the US blockade of its ports and tougher sanctions introduced last month.

“Intensified Iranian attacks drove Gulf crude flows sharply lower,” Kpler analysts said in a report on Thursday, adding that they expected a slower and more uneven recovery in Hormuz flows in the absence of a comprehensive political deal.

Ukraine struck a Russian oil refinery on Thursday after President Volodymyr Zelenskiy declared that Kyiv was abandoning a ceasefire covering energy sites announced by US President Donald Trump and criticized Trump’s willingness to strike deals with Moscow.

Russia’s Ryazan oil refinery has suspended operations at a primary crude distillation unit following a drone attack in the region on Thursday, two industry sources told Reuters.

“Conflict in the Middle East still keeps coming back and I think it’s questionable how much diesel fuel Russia can actually deliver to the markets.”

“Those two factors are just continuing to have traders be buyers,” said Dennis Kissler, senior vice president of trading at BOK Financial.

To boost supply, the International Energy Agency agreed on Thursday to release more than 20 million barrels of fuel to the market.

The United States also issued a request for proposal for an exchange of up to 17 million barrels of crude oil from the nation’s Strategic Petroleum Reserve, the Department of Energy said on Friday.

Washington previously agreed to loan 172 million barrels of oil from the SPR as part of a wider deal with about 30 countries in the International Energy Agency to release 400 million barrels from reserves around the world.

Brent crude was little changed on Thursday, while WTI settled up more than 3 percent after news that the US was weighing plans to ease restrictions on the world’s shadow fleet of tankers and after a big US crude stock draw on hurricane production shut-ins.

Indonesia's stock market is no longer worthy of "emerging market" status, MSCI said on Friday, laying ​out a plan to remove it from a suite of indexes tracked by funds, a shock move that sparked the steepest one-day drop in Jakarta shares since 1998.

Coming a month ahead ‌of a scheduled review, MSCI's change of tack stunned investors and irked Jakarta officials, with the Indonesian regulator unveiling sanctions against those linked to alleged trading manipulation in shares of three firms.

The benchmark stock index, already the world's worst performer this year, closed down 11.57%, in its biggest single-day drop since January 1998.

The rupiah currency slid as much as 0.8% to 18,070 a dollar, its weakest since late July, but recovered some ground.

Equities in Southeast Asia's biggest economy have struggled since a January freeze in the MSCI indexes, with a threatened downgrade ​to "frontier" status because of opacity in ownership and trading behaviour.
The market has lost more than $350 billion in capitalisation since, with about $60 billion wiped out on Friday alone.

MSCI cited, opens new tab insufficient reforms to tackle the problems and ​said even a downgrade to "frontier" status would not reflect the severity of the issues, but proposed instead to move further beyond that, to "standalone" status.

"Significant concerns remain around market ⁠dysfunction," MSCI said in a statement on Friday. "Accordingly, MSCI considers Indonesia's continued classification as an emerging market no longer appropriate."

The lower "standalone" status it proposed would exclude Indonesian stocks from global indexes tracked by billions of dollars in passive ​investment, forcing funds that follow, or are ranked against, the indexes, to sell.
UBS estimated such a move could trigger about $4 billion of passive outflows from Indonesia, with active investors potentially adding a further $15 billion in outflow.

Foreign investors have already ​net sold $4.7 billion worth of Indonesian stocks in 2026.

Indonesia's senior economic minister, Airlangga Hartarto, said there was "a big question mark" over why MSCI did not discuss the downgrade to "standalone" status during a meeting this week in the Thai capital of Bangkok.

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He made the comment ahead of a meeting of top officials, including the finance minister, the governor of the central bank and other related officials to discuss MSCI's announcement.

The Indonesia Stock Exchange said it had taken concrete steps to enhance transparency and integrity in the capital market, ​and CEO Jeffrey Hendrik said he would request further clarification on the basis of the announcement.

The move did not reflect the health of the vast majority of listed companies or indeed the Indonesian economy, said Angus Mackintosh, an ​ASEAN specialist at Aletheia Capital in Singapore, adding that "grouping Indonesia with Lebanon, Palestine, and Argentina does not make sense".

He added, "This is a wake-up call for Indonesia."

Indonesia would be the largest economy in the group if it was downgraded to "standalone" status.

MSCI SCRUTINY ‌RAISES MORE QUESTIONS

MSCI's ⁠announcement piles pressure on the government of President Prabowo Subianto.
It is the latest of a series of setbacks for Indonesia this year, with Moody's and Fitch cutting their sovereign rating outlooks to negative, citing reduced policymaking credibility.

"The proposal highlights MSCI's dissatisfaction with the pace of reforms and raises further questions about the investability of the market," said Tan Altundag, investment manager for emerging equities at Pictet Asset Management.

"The investment implications could be significant," said Altundag, who has no holdings in Indonesia.
The office of Finance Minister Suahasil Nazara, who chairs the financial stability board, did not reply to a request for comment.

In a sign of investor anxiety over the index provider's move, there was a rush for the exits when ​the market opened, triggering a 30-minute trading halt on ​the Jakarta exchange.

"It's the first time this has ⁠ever happened in my 20 years in the stock market," said Liza Camelia Suryanata, head of research at stockbroker Kiwoom Sekuritas Indonesia, referring to the chaotic opening minutes.

MSCI's move seemed heavy-handed, given Indonesia's efforts to tackle issues around market transparency and increase the free-float requirement for listed firms, Mackintosh added.

"The only way for Indonesia to remedy this situation would ​be to impose severe sanctions and fines on those involved in concerted share manipulation," he said.

After the MSCI move, Indonesia's Financial Services Authority (OJK) disclosed fines of millions ​of dollars for market participants ⁠involved in trading violations concerning three listed firms - Dian Swastatika Sentosa, Barito Renewables Energy and Petrindo Jaya Kreasi.

Investors allegedly conducted "planned and structured" price manipulation of Dian Swastatika's shares, said Hasan Fawzi, an official of the regulator.

Shares offered in the IPOs of Barito Renewables and Petrindo were allegedly intended from the outset for parties linked to the controlling shareholder, leading to concentrated ownership.

The companies did not immediately respond to Reuters emails seeking comment.

DOWNGRADE PLANNED FOR MID-2027

MSCI said it would run a consultation with ⁠market participants for ​a downgrade to "standalone" status until April 2027 and then proceed with reclassification unless it finds clear evidence of improvement in market governance ​and function.

Standalone markets are not included in MSCI's emerging or frontier index products, which are tracked by passive funds and treated as performance benchmarks for other fund managers.

MSCI says reclassification to standalone status may occur in the case of severe deterioration in market accessibility or size and ​liquidity, with Argentina the most recent example.

The first phase of an India-US trade deal is in the final stages of drafting, India’s trade minister said on Thursday, but reiterated that New Delhi would proceed only if it secures an advantage over competing exporters.

New Delhi ‌and Washington agreed to a framework for the deal in February which brought down to 18 percent from 50 percent the punitive tariff on most Indian goods imposed in August last year after a previous round of talks ​collapsed.

Since then, negotiations have run into hurdles, with officials on both sides signalling that efforts to reach a final agreement have slowed.

Indian trade minister Piyush Goyal said the “first tranche” of the deal would be finalised soon.

“It’s going through the final contours, the legal ​drafting, and we hope to be able to finalise that soon and operationalise that once we ​get comparable advantage or competitive advantage over our peer countries,” a statement from his office quoted him as saying at an event in New Delhi.

Goyal was referring to New Delhi’s efforts to secure a tariff advantage for Indian exporters over competing economies such as Bangladesh, Vietnam and Indonesia in the US market.

India wants to ensure its exporters face tariffs no higher than those imposed on competing economies do.

Trade Secretary Rajesh Agrawal ‌echoed Goyal’s ⁠comments.

“We anticipate concluding and signing the trade deal at the earliest possible time,” Agrawal said, adding that India was seeking preferential market access and greater tariff stability under the proposed agreement.

India’s goods exports to the United States rose to $42.79 billion in April-August from $40.39 billion a year earlier. In the fiscal year 2025/26, India recorded a ⁠trade surplus of nearly $34 billion with the United States.

Neither side has publicly detailed the reasons for the delay, but one recent complication has been a new US law that could pave the way for tariffs of up to ⁠100 percent on Indian goods because of New Delhi’s continued purchases of Russian oil.

The trade talks have unfolded against a backdrop of increasingly strained ties between India and the United States, complicating efforts to steady ⁠their trade partnership.

US Secretary of State Marco Rubio will visit India and Uzbekistan, from October 17 to 22, and will meet government and business leaders to discuss energy cooperation, commercial investment and broader economic ties.

The International Monetary Fund expects energy-rich Middle Eastern economies to bounce back, but not in the medium term, the organisation’s regional chief said on Thursday, as fighting continued between Saudi Arabia and Yemen’s Houthis.

The statement comes as the IMF projects a widespread contraction in Gulf economies following months of war that began in Iran and has now spread to Saudi Arabia and Yemen, with maritime energy traffic still impacted.

“We will not go back to the pre-war trajectory in the medium term because this shock will have a scarring impact on various sectors and also will disrupt a certain number of infrastructure, and will require additional spending in order to increase resilience,” IMF regional director Jihad Azour told reporters.

The warning comes as officials and experts huddled in Bangkok this week to discuss headwinds facing the global economy, including stubbornly high energy costs and questions over the sustainability of the artificial intelligence boom.

The IMF on Tuesday released projections showing that the Middle East and Central Asia region -- directly exposed to the Iran war -- is expected to contract 0.3 percent in 2026. Saudi Arabia is among the worst affected, with its economy projected to shrink 3.3 percent.

The projection points to a rare recession for the Gulf kingdom, which has long been buffered by robust energy exports. On Wednesday, IMF chief Kristalina Georgieva warned that ongoing attacks targeting Saudi Arabia could affect people “everywhere”.

A violent battle between a Saudi-led coalition and Yemen’s Houthis has sharply escalated in recent days, with fatal missile strikes hitting airports and energy facilities, as well as the headquarters of the kingdom’s state oil giant Aramco.

US consumer inflation was hotter than anticipated in September, government data showed Wednesday, as Washington’s continued war with Tehran pushed energy costs higher, deepening strains on American households ahead of next month’s midterm elections.

The uptick underscores voter worries over high costs of living, and comes as President Donald Trump is campaigning in US states to shore up support for his Republican Party as it tries to retain control of Congress.

The consumer price index (CPI) rose 3.7 percent year-on-year in September, the Department of Labor said, more than the 3.6 percent forecasted by analysts according to MarketWatch.

This was a notable acceleration from 3.4 percent in August, in one of the last major economic reports before the November 3 vote.

Inflation picked up pace on a month-on-month basis too, accelerating from 0.4 percent in August to 0.6 percent last month.

Gasoline costs accounted for more than half of the monthly CPI jump, surging 9.1 percent in September.

The higher-than-expected inflation reading has raised the odds of a second straight interest rate hike at the US central bank’s October 27-28 policy meeting, although many expect the Federal Reserve to proceed cautiously.

Economist James Knightley at ING noted that Fed officials John Williams, Philip Jefferson and Christopher Waller have suggested “that we don’t need to see back-to-back interest rate increases,” instead leaning towards “a slow and steady” approach.

He expects the Fed will want to be “careful and cautious in terms of its policy tightening.”

Traders see a 37.1 percent chance that the Fed will raise rates by another 25 basis points in October, according to CME Group’s FedWatch tool. The probability was around 22 percent a day prior.

“We expect at least two more rate hikes by early 2027, starting in December,” said KPMG chief economist Diane Swonk. “September gave the Fed more reason to hike, even if officials hold in October.”

Industries sensitive to interest rates, including housing, are already under pressure from steeper borrowing costs.

Yields on US government bonds spiked after the inflation report. The 10-year Treasury yield, which influences rates on mortgage and auto loans, rose to 5.3 percent from 5.2 percent. But it has since moderated.

“Energy lit the match; sticky services, shelter and goods prices kept the fire burning,” said KPMG’s Swonk of the inflation report.

Energy prices have soared since the United States and Israel attacked Iran in late February, prompting Tehran to block off the Strait of Hormuz, a vital route for oil and gas shipments.

Average prices at US gasoline pumps have surged more than 45 percent since the start of the Middle East war to $4.33 per gallon, according to AAA motor club data.

Diesel prices have soared even more, by 67.7 percent, boosting the cost of transporting goods and threatening further spillovers to consumers.

“Again, the Iran-US conflict has led to higher motor fuel costs that everyone is experiencing,” ING’s Knightley told AFP.

“The US is also seeing substantial increases in airline fares,” he said, adding that this will likely contribute to additional price pressures.

Core CPI, which excludes volatile food and energy prices, was up 2.6 percent from a year ago.

Although high gasoline and diesel prices drove about half of the September spike in inflation, “it’s starting to spill into other areas,” warned Heather Long, chief economist at the Navy Federal Credit Union.

“Airfares, used cars and recreation all had big price jumps,” she added. “Americans are seeing their pay totally wiped out by inflation. That’s been the case for half a year now.”

With the underlying US economy remaining strong as massive spending linked to the artificial intelligence buildout boosts demand for chips and labor, economists also caution that higher costs could continue filtering through to households.

Oil markets initially treated the Iran war as a brief bullish disruption in a long-term bearish trend.

But traders are now betting that oil prices will remain elevated through 2028, forcing a rethink of the global inflation outlook.

Eight months into the war, the buffers that helped absorb the initial energy shock – most notably onshore crude oil stockpiles – are wearing dangerously thin.

At the same time, the recovery in crude exports through the Strait of Hormuz remains fragile, global refining capacity has been eroded and credible diplomatic pathways to end the conflict appear narrower than ever.

Global benchmark Brent crude futures tell the story.

Contracts for delivery in December 2027 have climbed more than 13 percent since the start of September to $86 a barrel, the highest level for the contract, while December 2026 contracts have gained around 12 percent.

The Brent forward curve is not a price forecast, of course.

But it reflects the willingness of refiners, airlines, commodity traders and asset managers to lock in elevated prices months and even years into the future.

In effect, market participants are paying a premium against the possibility that today’s disruptions will become tomorrow’s normal.

This market positioning stands in stark contrast to widely held industry expectations of a recovery in global oil supplies next year.

The International Energy Agency projects global supply will rise to 108.3 million barrels per day (bpd) in 2027 from 100.7 million bpd this year as Middle Eastern exports recover.

Demand, meanwhile, is forecast to increase from 102.4 million bpd to 104.4 million bpd next year, still slightly below 2025 consumption.

This recovery is expected to be concentrated in petrochemical feedstocks rather than transportation fuels like diesel.

Regardless, the agency’s projected balances imply a sizeable supply surplus next year that would normally weigh on prices.

Yet the steady rise in long-dated futures suggests investors are increasingly sceptical that this recovery will fully materialise or, if it does, that it will endure.

The standoff between Washington and Tehran remains centred on control of the Strait of Hormuz.

While oil flows through the strategic waterway have rebounded to near pre-war levels in recent weeks thanks partly to US naval support, Iran has intensified attacks on vessels in the past week and threatened further disruption.

The conflict has also expanded beyond the Gulf.

Yemen’s Iran-aligned Houthis have recently stepped up missile and drone attacks on Saudi Arabia, including strikes this week on the headquarters of Saudi Arabia’s state-owned oil giant Aramco (2222.SE) in Dhahran.

Given this backdrop, every barrel leaving the Gulf now carries a widening security premium.

Complex logistics, elevated freight rates, high insurance costs and military protection now account for nearly a third of the cost of moving a barrel of oil out of the region, compared with 3 percent before the war. Absent a durable settlement over Hormuz, much of that cost is likely to remain entrenched in prices for the foreseeable future.

The strain is even more visible in diesel markets.

Benchmark European diesel futures hit a record $1,480 per metric ton, equivalent to around $210 per barrel, in mid-September amid an acute shortage of supplies caused by disruptions in the Middle East and Russia.

Since Russia’s 2022 invasion of Ukraine, drone attacks by Kyiv have crippled Russian refineries, forcing Moscow to ban diesel exports earlier this year.

US President Donald Trump on Friday announced an agreement with Russian President Vladimir Putin to allow Moscow to resume some diesel exports and later proclaimed another “energy ceasefire” between Russia and Ukraine.

But the additional Russian exports cited by Trump are minuscule – equivalent to roughly 12 hours of global supply – and no one, including the two parties involved, is giving much credence to the purported ceasefire.

Instead, traders are focused on the dramatic loss of fuel production capacity this year, with diesel futures signalling continued tightness ahead.

Contracts for delivery in December 2027 climbed above $1,000 a ton for the first time this week, compared with a pre-war level of $644.

The fuel repricing may ultimately prove more important than the rise in crude itself.

Diesel powers the trucks, ships, factories and farms that underpin global commerce.

Sustained diesel inflation has historically seeped into the wider economy through higher transportation, manufacturing and food costs.

With headline US inflation running at 3.7 percent in September – almost twice the Federal Reserve’s targeted 2 percent rate – and core inflation creeping up, persistently high diesel prices remain a major concern for US and global policymakers.

A NEW REALITY

For much of this year, energy markets operated on the assumption that the Iran war would resemble past geopolitical crises: a sharp but temporary disruption followed by a quick return to normality.

Increasingly, investors are concluding otherwise.

The issue is no longer simply how much oil can move through Hormuz.

Markets need to know whether the global energy system can quickly rebuild the inventories, refinery capacity and supply chains damaged by months of conflict.

Until then, the world risks becoming trapped in an era of structurally higher energy costs that lasts long after the shooting stops.

The head of the International Monetary Fund on Wednesday called for countries to make "urgent repairs" to address fiscal balances, as bond yields spike and pressure grows on governments to manage ballooning debt.

"What is our loudest call to policymakers right now? Make urgent repairs to the fiscal house before the cracks widen," Managing Director Kristalina Georgieva said at the Annual Meetings of the IMF and the World Bank in Bangkok.
"Now is the time to enhance revenues, to rationalise spending and improve public financial management," she said.

The comments come as officials and experts gather in the Thai capital to discuss challenges facing the global economy, as higher energy prices caused by the US war with Iran drive up costs.

In its closely watched World Economic Outlook released on Tuesday, the IMF raised its 2026 global growth forecast by 0.1 percentage points to 3.1 percent.

However, it warned that while there is new economic activity sparked by rising investment in artificial intelligence, poorer countries are not benefiting as they deal with soaring energy costs.

The global economy "remains resilient in the face of very frequent repetitive shocks and in the face of uncertainty", Georgieva said at a news conference Wednesday. "But this resilience is reaching its limits."

The IMF is "ringing the alarm bell on excessive global economic imbalances growing", she added.

"To put it very simply, China needs to spend more, the US has to save more and Europe has to invest more," she said.

The global economy has weathered a series of shocks better than expected, but repeated disruptions are eroding countries’ capacity to respond, IMF Managing Director Kristalina Georgieva said on Wednesday.

Presenting the fund’s Global Policy Agenda at a press conference during the 2026 Annual Meetings of the IMF and the World Bank in Thailand, she said global growth is projected at 3.1 percent in 2026, unchanged from the April forecast but below last year’s 3.4 percent.
The IMF said the stable headline figure masks “divergent outcomes” across economies.

Two opposing forces are at work. Wars in the Middle East and Ukraine are disrupting supply chains and driving up commodity prices, while rapid advances in artificial intelligence (AI) are boosting investment, trade and stock markets.

The energy shock proved less damaging than feared, thanks to flexible supply responses, inventory drawdowns, lower oil dependency and fiscal support.A downturn has been avoided “for now”, the IMF said, but growth remains modest and inflationary pressures persist.Energy exporters not directly affected by the conflicts, economies integrated into technology value chains, such as Thailand and Malaysia, and countries with strategic reserves have fared better. Energy importers, countries with limited policy buffers and those less exposed to the technology boom are facing greater strain.

Many low-income and fragile states fall into the latter group, raising the risk of widening income disparities across countries.

ERODING BUFFERS

Policy buffers have weakened, the IMF warned. Global public debt is approaching 100 percent of gross domestic product (GDP), while rising sovereign bond yields in advanced economies are putting additional pressure on emerging and developing economies, particularly low-income countries facing high debt-service costs.

Other risks include trade tensions, El Niño’s potential impact on food markets, a possible market correction linked to AI, vulnerabilities in non-bank financial institutions and cyber threats.

Georgieva said cyber threats were already causing real-world damage, citing an incident in France in which a cyberattack caused refrigerator temperatures to rise, spoiling food. As such attacks become more frequent, they could target financial systems, turning cyber risk into a financial stability concern.

POLICY PRIORITIES

The IMF urged governments to protect people rather than prices, recommending temporary, targeted support for vulnerable households instead of broad price controls.

Credible fiscal consolidation remains a top priority, the fund said. A restrictive monetary stance is generally still warranted but should be calibrated to country-specific conditions. Monetary policy should tighten further if inflation expectations risk becoming unanchored.

Temporary foreign exchange intervention may be justified to curb disorderly currency movements, but it should not replace broader macroeconomic adjustment. Financial supervisors should also contain excessive leverage, particularly in technology-related exposures.

The fund said its “Bangkok Blueprint” aims to strengthen safeguards for digital finance, improve cyber protection and combat digital fraud.

It also cited research suggesting that AI could raise sub-Saharan Africa’s GDP by up to 4 percent cumulatively over a decade.

For low-income countries, the IMF stressed the need to address debt vulnerabilities despite declining official development assistance. It said it was involved in debt restructuring cases under the Common Framework.

The fund is also overhauling its surveillance and programme design to make its support “agile, selective, and realistic”.

US inflation rose faster than expected in the 12 months to September, according to official data, in the final major inflation report before next month's midterm elections.

The annual inflation rate climbed to 3.7%, up from 3.4% in the year to August, driven largely by rising gasoline prices amid disruptions to energy supplies in the Middle East linked to the US-Israel conflict with Iran, reports BBC.

The cost of living has emerged as a major issue in the US midterm elections, putting renewed focus on the pace of price increases and their impact on households.

What is inflation?

Inflation measures how quickly the prices of goods and services rise over time.

For example, if a bottle of milk costs $1 and its price increases to $1.10 after a year, the annual inflation rate for that product is 10%.

In the US, the Bureau of Labor Statistics (BLS) tracks inflation using the consumer price index (CPI). The index measures price changes across a wide range of everyday goods and services, including food, gasoline and medical care, to assess overall price movements in the economy.

The BLS periodically updates the basket of goods and services used in its calculations to reflect changes in consumers' spending patterns and lifestyles.

What causes inflation?

Inflation can rise for several reasons, including stronger demand, limited supply and higher production costs.

When demand for a product exceeds the available supply, sellers may increase prices. The popularity of Labubu dolls in recent years, which pushed up resale prices, is one example.

Rising incomes can also increase consumer spending, potentially putting upward pressure on prices.

Supply disruptions can have a similar effect. When the availability of a product falls but demand remains steady, prices tend to rise. Crude oil is one example, as it is a key raw material used to produce gasoline and diesel.

Before the US-Israel conflict with Iran began, crude oil was trading at just over $70 a barrel. Disruptions to supplies during the conflict pushed prices sharply higher, with oil currently trading above $100 a barrel, according to the supplied BBC report.

What is the current rate of inflation?

US inflation reached 3.7% in the year to September, exceeding expectations as gasoline prices surged.

Fuel prices rose 34.2% over the 12-month period and increased by 9.1% in September alone. The monthly rise accounted for more than half of the overall increase in inflation, according to the BLS.

Energy inflation climbed 20.4% over the year, reflecting higher prices for fuel oil, energy services and electricity. Fuel oil, which is commonly used for home heating, recorded a 74.2% annual increase.

Economists will be watching whether higher energy costs spread to other parts of the economy, particularly food prices, and push inflation further upwards. The US Federal Reserve will also monitor these developments as it considers interest-rate policy.

Food inflation remained relatively subdued, with prices unchanged in September and up 2.5% over the year. Core inflation, which excludes food and energy prices, stood at 2.6%.

Will the inflation hike change Social Security payments?

Following the inflation report, the Social Security Administration announced a 3.6% increase in Social Security benefits for 2027, covering programmes including retirement, survivors and disability insurance.

The adjustment is expected to raise the average monthly retirement benefit by $75.

The cost-of-living adjustment will take effect in January for around 72 million people. Higher payments for the 7.2 million people receiving Supplemental Security Income are due to begin on 31 December.

How have tariffs affected inflation?

Since returning to office for a second term, US President Donald Trump has imposed tariffs on imports from trading partners around the world.

After the Supreme Court struck down most of the additional global tariffs in February, Trump announced a new 10% global tariff to replace them.

Trump has argued that tariffs would increase government revenue, encourage domestic manufacturing and persuade consumers to buy American-made products. However, the additional import taxes have also contributed to higher prices, according to research by the Federal Reserve Bank of New York.

Tariffs are taxes on imported goods that are generally paid by importing businesses. Unless overseas suppliers cut their prices to absorb some of the additional cost, US companies face higher expenses that can be passed on to consumers.

The New York Fed found that foreign exporters reduced their prices only marginally in response to the new tariffs, leaving US businesses to bear nearly 90% of the additional tax burden.

Tariffs can also increase the cost of domestically manufactured products when US producers rely on imported components or raw materials.

The research found that each percentage-point increase in average tariffs led to an almost 0.25% rise in consumer goods prices after one year.

Has inflation been worse lately?

Although the current inflation rate remains above the Federal Reserve's 2% target, it is well below the levels recorded in recent years.

Inflation accelerated during the Covid-19 pandemic as supply-chain disruptions and other pressures pushed up costs.

Energy prices climbed further in early 2022 after Russia launched its full-scale invasion of Ukraine, sending oil prices above $100 a barrel.

Together, these pressures helped drive US inflation to a peak of about 9%.

Can inflation ever go down?

A slowdown in inflation does not necessarily mean prices are falling. It means prices are increasing at a slower pace.

For example, if inflation drops from 5% to 3%, goods and services are generally still becoming more expensive, but at a slower rate than before.

Moderate inflation is widely considered compatible with a healthy economy. The Federal Reserve's 2% target reflects its aim of maintaining relatively stable prices while supporting economic activity.

If inflation falls too low, consumers may postpone purchases in anticipation of further price declines. Weaker demand can then prompt businesses to cut wages or reduce their workforce, potentially slowing economic growth.

Asian equities fell sharply on Tuesday led by technology shares as a widening conflict in the West Asia kept oil prices elevated, supporting the dollar ahead of an earnings season that will set the tone for the rest of the year.

Energy prices are back driving global markets as investors weigh the geopolitical developments in West Asia and Russia-Ukraine, with Brent crude futures at $105.9 per barrel, near a two-week high.

Oil markets have been volatile as investors contend with the supply risks from attacks on Saudi Arabia while considering the prospect of additional diesel supplies from Russia.

"Markets are rediscovering that geopolitics matters most when it feeds back into inflation," said Charu Chanana, chief investment strategist at Saxo in Singapore.

"The renewed jump in oil is keeping pressure on yields and taking some shine off expensive growth stocks, especially as the Russia-Ukraine energy truce looks fragile and West Asia supply risks remain live."

In stocks, MSCI's broadest index of Asia-Pacific shares outside Japan fell 2 per cent in early trading, with tech-heavy South Korea's sliding 6 per cent. Japan's Nikkei sank 2.6 per cent after returning from a holiday.

"A lot of it has to do with the chip selloff we saw on Wall Street overnight. That's bleeding into the Asian region," said Kyle Rodda, a senior analyst at Capital.com.

Overnight, the tech-heavy Nasdaq fell 0.5 per cent, dragged by chipmakers as investors fret about the durability of the rally in AI stocks amid higher competition between the US and China.

"When you add another jump in oil prices and some positioning ahead of inflation data and earnings, you have all the ingredients for a risk-off day in Asia," Rodda said.

The cautious sentiment helped keep the US dollar near an 18-month high. The euro last bought $1.1157, while the Japanese yen was at 158.50 per US dollar.

Earnings Test Awaits

Investors' attention will be on the slew of US bank earnings this week to get a gauge on the impact of the recent surge in Treasury yields on dealmaking, lending growth and funding costs across the industry.

A toxic mix of inflationary pressure from elevated energy prices and worries about ballooning government debt have triggered several bouts of bond selloffs in recent weeks, pushing borrowing costs to multi-decade highs across the globe.

Four of the six largest US lenders, JPMorgan Chase, Goldman Sachs, Citigroup and Wells Fargo will report results later in the day.

Anthony Saglimbene, chief market strategist at Ameriprise Financial, said investors will be looking to bank results for insights on whether households are still paying their bills, borrowing, and spending at healthy levels.

"The Q3 earnings season starts with stocks near record highs and little room for disappointment," he said.

"We believe for stocks to have an opportunity to grind higher from here, corporate America needs to turn in more A’s and B’s on their latest report cards and show they can maintain that momentum into year-end."

The benchmark 10-year yield was down 2.9 basis points at 5.214 per cent in Asian hours, staying close to the 24-year high of 5.364 per cent it hit last week.

Oil prices fell on Tuesday and were on track for their first decline in nearly a week, as traders assessed supply risks from attacks on Saudi Arabia while weighing the prospect of additional diesel supplies from Russia.

Brent crude futures fell $1.30, or 1.2 percent, to $105.35 a barrel by 0329 GMT, while US West Texas Intermediate crude futures were down $1.25, or 1.3 percent, at $92.49 a barrel.

Both benchmarks climbed nearly $2 a barrel in the previous session, with Brent settling at its highest since September 15.

US President Donald Trump said Russia had agreed to supply diesel to global markets, and his administration temporarily lifted US sanctions on Russian fuel designed to deprive Moscow of revenue for its war on Ukraine.

Additional supplies could help alleviate tightness in global fuel markets, tempering some of the supply concerns that have supported crude prices recently.

However, "there is considerable scepticism over the Russia-Ukraine energy ceasefire, particularly with reports that Russia has hit Ukrainian energy targets since Trump announced it," ING analysts said in a note.

Lawmakers from both parties in the US complained Trump's agreement with Putin appears to violate US law barring imports of Russian energy until Moscow ends its aggression against Ukraine.

Concerns over the vulnerability of Gulf energy infrastructure and shipping lanes remained in focus after Iran-aligned Houthis struck Riyadh's international airport over the weekend, while tanker attacks were reported near the Strait of Hormuz.

The incidents threatened to derail a recovery in Middle East supplies seen in September, and have reinforced fears of further disruptions along one of the world's most important energy transit routes.

"Fresh diesel supply from Russia and steadier Saudi flows are offering some relief, yet the market still looks more worried about the risk of further hits to ships or pipelines in the Gulf than it is reassured by extra barrels," said Tim Waterer, chief analyst at KCM Trade.

"Until we see clearer signs of de-escalation, the path of least resistance still leans higher," he said.

Ministers of OPEC and non-OPEC Participating Countries in the Declaration of Cooperation said shipping and insurance costs have surged to unprecedented levels of over one-third of the commodity value, impeding efficient movement of crude oil and products.

OPEC has revised down its oil demand growth forecast for this year to 400,000 barrels per day from 1.4 million bpd at the start of the year, in line with developments throughout the year, Haitham Al Ghais, Secretary General of the organisation said on Monday.

US payments firm Visa has received approval from China's central bank to begin preparations for a domestic bank card clearing institution in the country, ending years of waiting to tap into one of the world's largest payment markets.

The move marks a major step for Visa to join rivals American Express and Mastercard in operating bank card clearing services in China and represents a further opening up of the nation's tightly controlled financial sector.

The People's Bank of China (PBOC) issued an administrative approval to Visa Information Technology (Beijing) Co Ltd permitting it to begin preparatory work, according to the central bank's website.

Visa Information Technology (Beijing) is a foreign-invested enterprise established in China by Visa.

"The approval of our Application to Prepare marks a significant step forward in Visa's long-standing commitment to China," Visa CEO Ryan McInerney said in a statement on Tuesday.

The approval comes after US President Donald Trump's summit with Chinese leader Xi Jinping earlier this year in China, which included more than a dozen CEOs of top US companies, including those of Mastercard and Visa.

"We greatly appreciate the important role of the leaders of the United States and China in pursuing a constructive and strategically stable relationship between the world's largest economies," McInerney said.

Visa must complete its preparations within one year, after which it can apply to open for business, the PBOC said.

The central bank, together with the nation's top banking regulator, will review the application and, if it approves, issue a bank card clearing business license.

A GOODWILL GESTURE?

Visa was hoping to break into the Chinese market, which is dominated by state-controlled China UnionPay, with an unprecedented 100 percent ownership stake in a future joint venture license, sources have told Reuters.

"This should be viewed as a goodwill gesture from Beijing towards Washington ahead of the next meeting between Presidents Xi Jinping and Donald Trump," said George Chen, partner and chair of digital practice at The Asia Group.

The two are expected to meet again on the sidelines of the APEC Economic Leaders' Meeting in Shenzhen in November.

Greater market access in financial services has long been a priority for Washington, which has consistently urged Beijing to provide a more open and level playing field for foreign firms operating in China's financial sector, said Chen.

Mastercard, partnering with local clearinghouse NetsUnion Clearing Corp, won approval to prepare to set up its bank card clearing business in China in 2020.

American Express' joint venture in the country was cleared to start bank card clearing services later that year.

In China, bank cards processed 4.6 trillion transactions worth 963.60 trillion yuan ($143.92 trillion) in 2025, according to data from the central bank, highlighting the market's enormous potential.