Asian markets tumble as US-Iran fighting lifts oil

Stocks have slumped at the start of the Asian trading session as a bond market-induced panic on global markets spills over into the region, after renewed attacks by the US on Iran pushed oil prices higher.

MSCI's broadest index of Asia-Pacific shares outside Japan was down 0.8 per cent in early trading on Wednesday as South Korea's KOSPI dropped three per cent on the open and Japan's Nikkei 225 sank 2.2 per cent. S&P 500 e-mini futures were flat.

Brent crude futures extended gains into a second day as trading resumed in Asia, rising 0.7per cent to $US95.34 ($A133.19) a barrel after the US launched a barrage of airstrikes on Iran on Tuesday, which earlier pushed oil prices to a five-week high.

"The threat of further disruptions to the Strait of Hormuz has brought about renewed anxiety over inflation, driving a selloff in stocks across most major markets and a rout in global bond markets," Westpac analysts wrote.

The yield on the US 10-year Treasury bond was up 0.4 basis point at 4.798 per cent as the US dollar index, which measures the greenback's strength against a basket of six currencies, held near the highest levels of the past two weeks at 99.67.

Overnight on Wall Street, the S&P 500 slipped 0.7 per cent and the Nasdaq Composite fell one per cent as a surge in government bond yields weighed on equities.

The declines came as data from the Institute for Supply Management released on Tuesday showed US manufacturing activity moderated in August amid a slowdown in new orders, but remained in expansionary territory.

Traders believe that the Federal Reserve is likely to lift interest rates at its next meeting in two weeks, though a hike is not certain.

Fed funds futures are pricing an implied 67 per cent probability of a 25-basis-point increase to benchmark borrowing costs at the US central bank's two-day meeting ending on September 16, compared to a 39.6 per cent chance a week ago, according to the CME Group's FedWatch tool.

Gold was flat at $US4,328.59 ($A6,046.91) an ounce, while bitcoin slipped 0.2 per cent to $US77,246.57 ($A107,911.15) and ether was 0.3 per cent lower at $2,412.60.