Australia

Australian shares are set to open lower, after Wall Street was buffetted by fears the Middle East conflict will escalate.

ASX futures were down 0.8% or 63 points as of 8:00am on Tuesday, suggesting a lower open.

US stocks fell broadly Monday, extending their recent slump in response to continuing Middle East tensions and surging U.S. Treasury yields.

Up as much as 0.9% in early trading, the S&P 500 finished down 1.2%. The Dow Jones Industrial Average fell 0.7%, or roughly 248 points, while the Nasdaq Composite dropped 1.8%.

In commodity markets, Brent crude oil was down 0.04% to US$90.41 a barrel, while gold was flat at US$2,383.11.

In local bond markets, the yield on Australian 2 Year government bonds was unchanged at 3.89% while the 10 Year yield was also unchanged at 4.26%. US Treasury notes were up, with the 2 Year yield at 4.92% and the 10 Year yield at 4.60%.

The Australian dollar was 64.38 US cents down from its previous close of 64.75. The Wall Street Journal Dollar Index, which tracks the US dollar against 16 other currencies, was up at 100.42.

Asia

Chinese shares ended mostly higher as investor sentiment was lifted by the new capital-market guidelines that stressed investor protection and regulatory enforcement. Telecommunications led the gains. China Mobile gained 3.75% and China Unicom was up 4.65%. Energy shares ended broadly higher amid the escalation of conflicts in the Middle East. PetroChina put up 3.9% and Cnooc advanced 2.2%. Contemporary Amperex Technology rose 4.6% ahead of its 1Q results due after market close. The benchmark Shanghai Composite Index ended 1.3% higher at 3057.38, the Shenzhen Composite Index was down 0.3%, and the ChiNext Price Index gained 1.85%.

Hong Kong's Hang Seng Index closed 0.7% lower at 16600.46, weighed by consumer-related stocks. Weakness in the Chinese yuan, coupled with Middle East tensions after Iran's attack on Israel over the weekend, likely weighed on markets. Focus will be on China's 1Q GDP data due Tuesday, as well as March retail sales and industrial production numbers, Sonija Li, head of retail research at Maybank Investment Bank, writes in a note. Among decliners, Chow Tai Fook Jewellery slumped 7.9% after it reported a surprise net closure of stores in China in the latest quarter, while Li Ning and Sands China both fell 4.6%. Energy stocks were among gainers, with PetroChina up 2.2%, China Petroleum & Chemical Corp. gaining 1.75% and Cnooc rising 1.5%.

Japanese stocks ended lower, dragged by falls in tech and pharmaceutical stocks, as tensions grow over the Middle East following an Iranian strike on Israel. M3 shedded 3.4% and Rakuten Group dropped 2.8%. Astellas Pharma lost 8.0% after it cut its net profit estimate for its fiscal year ended March. The Nikkei Stock Average fell 0.7% to 39232.80. Investors are closely watching developments in the Middle East, including any potential response from Israel, and their implications to the yen and crude oil prices. The 10-year Japanese government bond yield fell half a basis point to 0.855%.

Indian shares closed lower, dragged by the bank and finance sectors. Asian sharers were broadly lower due to geopolitical tensions in the Middle East following Iran's attack on Israel over the weekend.Wipro closed 2.7% lower, leading losses. ICICI Bank and Bajaj Finance were down 2.4% and 2.1%, respectively. Among gainers, Nestle India and Maruti Suzuki India both rose 1.2%. Markets are watching for further developments in the Middle East and its impact on oil prices for the rest of the week. China's 1Q GDP due Tuesday is also in focus. The benchmark Sensex was down 1.1% at 73399.78.

Europe

European shares ended Monday moderatley higher, with the pan-European Stoxx Europe 600 up 0.13% to 505.93, the CAC 40 up 0.43% to 8,045.11 while Germany's DAX added 0.54% to 18,026.58.

The FTSE 100 closed down 0.4% Monday as fears remained over an escalation of tensions in the Middle East, but oil prices remained low as markets reacted calmly to events in the region. "European and U.S. stock indices regained some of last week's losses on hopes of de-escalation in the Middle East and ended the day in positive territory, the exception being the FTSE 100, which dipped slightly," IG analyst Axel Rudolph said in a note. Fresnillo was the day's biggest faller, down 3.9%, followed by BP and Centrica, down 2.2% and 2.1% respectively. Beazly was the session's highest riser, up 3%, followed by Ocado and IMI, both up 2%.

North America

Stocks fell broadly Monday, extending their recent slump in response to continuing Middle East tensions and surging U.S. Treasury yields.

Stocks climbed in early trading, reflecting relief after Iran's well-telegraphed attack on Israel on Saturday resulted in minimal damage. Traders, though, remained nervous about how Israel might respond and the potential for the conflict to escalate.

Up as much as 0.9% in early trading, the S&P 500 finished down 1.2%. The Dow Jones Industrial Average fell 0.7%, or roughly 248 points, while the Nasdaq Composite dropped 1.8%.

Meanwhile, new data showed that retail sales increased more than expected last month. That suggested the economy remained on solid footing, but also led to a jump in U.S. bond yields as traders further scaled back bets on how much the Federal Reserve will be able to cut interest rates.

The declines extended a rough patch for stocks that started last week when new data showed the consumer-price index rose more than expected in March, marking the third straight month of firmer-than-anticipated inflation. Heading into that report, investors had been hopeful that the previous two rounds of hot inflation data could mostly be explained by seasonal distortions. But that argument became harder to make after the data.

Investors are facing "more volatility in the interest-rate market, getting more volatility around inflation, and you sprinkle on some geopolitical risks...it just suggests a bumpier near-term path for the market," said Keith Lerner, co-chief investment officer at Truist Advisory Services.

Interest-rate futures suggested Monday that investors think there is a slightly better than 50% chance that the central bank will cut rates twice by the end of this year, according to CME Group data. A month earlier, the chances of at least three cuts were placed at around 65%.

The yield on the benchmark 10-year U.S. Treasury note settled Monday at 4.627%. That was up from 4.499% Friday and 3.860% at the end of last year but still below the roughly 5% level it reached last October.

Higher Treasury yields can drag on stocks because they translate to steeper borrowing costs across the economy and can increase the appeal of owning bonds over riskier assets.

Interest-rate-sensitive sectors fared particularly poorly on Monday, with real-estate stocks in the S&P 500 falling 1.8%.

Tesla shares fell 5.6% after news that the electric carmaker was planning to lay off more than 10% of its global workforce. Shares of Goldman Sachs climbed 2.9% after the investment-banking giant reported sharply higher earnings in the first quarter. The S&P 500 is still up 6.1% this year despite its recent declines.

Monday's retail-sales report provided the latest evidence of the economy's remarkable resilience in the face of the Fed's most aggressive interest-rate-raising campaign in four decades. Overall, retail sales climbed 0.7% last month, well above the 0.3% forecast by economists surveyed by The Wall Street Journal. Sales in February were also revised upward.

The Atlanta Fed's real-time gross domestic product tracker ticked up after the report, suggesting that the economy grew 2.8% in the first three months of the year, up from a previous estimate of 2.4%. In January, economists surveyed by the Journal had anticipated annualized growth of less than 1% in the first quarter.

Oil prices were little changed, a sign that the risk of escalating warfare in the Middle East has been factored into this year's roughly 19% rise in U.S. crude prices. Benchmark U.S. futures declined 0.3% to end at $85.41 a barrel.