TOKYO – Asian markets saw a downturn while oil prices climbed on Tuesday amid faltering diplomatic negotiations aimed at resolving the Iranian conflict.

Although a ceasefire is in place, the critical Strait of Hormuz remains largely impassable. This poses significant challenges for Asian countries, particularly Japan, which heavily depends on this route for its oil imports.

Japan’s Nikkei 225 index dropped by 1.1% to settle at 59,884.12 after the Bank of Japan decided to maintain its key interest rate steady at 0.75%.

The Bank of Japan noted that although the economy is experiencing moderate growth, it is projected to decelerate as ongoing conflict drives up the cost of crude oil and other commodities. The decision by the monetary policy board was split, with a 6-3 vote. Japan has faced mounting pressure to incrementally raise interest rates, having kept them low for years to combat deflation.

“There are multiple risks to the economic forecast,” the bank stated, emphasizing the need to closely monitor developments in the Middle East for the foreseeable future.

In contrast, South Korea’s Kospi index showed a positive movement, increasing by 1% to reach 6,683.10.

Hong Kong’s Hang Seng dipped 0.7% to 25,751.04, while the Shanghai Composite shed 0.2% to 4,078.77.

Australia’s S&P/ASX 200 lost 0.6% to 8,717.80.

The price for a barrel of Brent crude to be delivered in June climbed $1.11 to $109.34. Brent to be delivered in July, which is where more of the trading is happening in the oil market, rose $1.08 to $102.77 per barrel.

Brent prices were at about $70 per barrel before the war and have briefly shot to nearly $120. Benchmark U.S. crude added 96 cents to $97.33 a barrel.

The U.S. Federal Reserve, European Central Bank, and Bank of England will also be announcing interest-rate decisions this week.

On Monday, the S&P 500 inched 0.1% higher to its latest all-time high, at 7,137.91, a downshift following weeks of big gains driven by strong corporate profit reports and hopes that the economy can avoid a worst-case scenario despite the war.

The Dow Jones Industrial Average dipped 0.1% to 49,167.79. The Nasdaq composite index edged 0.2% higher.

Investors are also looking ahead to earnings reports from some of Wall Street’s most influential stocks, including Alphabet, Amazon, Meta Platforms, Microsoft and Apple.

In the bond market, Treasury yields ticked higher following the rise in oil prices. The yield on the 10-year Treasury note rose to 4.33% from 4.31% late Friday.

In currency trading early Tuesday, the U.S. dollar inched down to 159.04 Japanese yen from 159.42 yen. The euro cost $1.1716, down from $1.1720.

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AP Business Writer Stan Choe contributed to this report.

Yuri Kageyama is on Threads: https://www.threads.com/@yurikageyama