Asia stocks declined, while the greenback and yen were steady in early trading in Asia as the US and its allies sought to head off a widening of the Middle East conflict. Oil and gold edged lower after Friday’s rallies.

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Japanese, Australian and South Korean shares all fell while equity futures in Hong Kong also pointed to losses, after US stocks dipped and bonds surged on Friday as traders sought out safety amid the looming prospect of a ground offensive in Gaza. In early Asia trading, contracts for US equities and Treasury yields gained.

US President Joe Biden is considering visiting Israel in the coming days as his officials held talks with Iran through back-channels to contain the Israel-Hamas war. A sharper escalation could bring Israel into a direct clash with Iran, a supplier of arms and money to Hamas, which the US and the European Union have designated a terrorist group. In that scenario, Bloomberg Economics estimates oil prices may soar to $150 and tip the world economy into recession.

“The Palestinian cause holds deep personal significance for many in the Arab world, and attempting to sideline it or prioritize economic interests over it in high-level diplomacy is a dangerous illusion,” Stephen Innes, managing partner at SPI Asset Management, said in a note Monday. “Hence, this is the primary reason an Israeli escalation in Gaza is a colossal powder keg waiting to ignite.”

Adding to the risk-off sentiment in early Asia, the US said it will tighten sweeping measures that restrict China’s access to advanced semi-conductors and chip making gear in a bid to prevent its geopolitical rival from getting a military edge.

In currencies, New Zealand’s dollar led gains among major peers after the country elected a center-right government on Saturday. Poland’s zloty jumped as a bloc of pro-European opposition parties appeared on track to unseat the nationalist government.

Big tech sold off on Friday in New York, with the Nasdaq 100 down over 1%. Boeing Co sank after saying it’s investigating quality issues affecting the 737 Max aircraft. JPMorgan Chase & Co and Wells Fargo & Co gained on solid earnings. Treasury 30-year yields dropped 10 basis points to 4.75%, unwinding part of the previous session’s surge. West Texas Intermediate crude neared $88 a barrel.

Jamie Dimon on Friday warned of serious geopolitical risks from a widening Israel-Hamas conflict.

“This may be the most dangerous time the world has seen in decades,” the JPMorgan Chase & Co. chief executive officer said in the bank’s third-quarter earnings statement. “The war in Ukraine compounded by last week’s attacks on Israel may have far-reaching impacts on energy and food markets, global trade, and geopolitical relationships.”

Disinflation Under Way

Traders also waded through the latest economic data and comments from central bank officials for clues on the policy outlook. Federal Reserve Bank of Philadelphia President Patrick Harker said disinflation is under way and reiterated that he favors holding interest rates where they are, barring a sharp change in data, despite a lift in US consumers’ year-ahead inflation expectations in early October.

Markets will also be parsing key economic data this week to gauge the health of the global economy. Among the highlights are Chinese growth data, inflation readings in Japan and New Zealand as well as central bank decisions in China, Indonesia and South Korea. Meantime, Fed chairman Jerome Powell is set to speak later this week following a string of stronger than expected data readings.

“Markets and policymakers have absorbed strong employment data and slightly higher inflation readings,” said Klaus Baader, global chief economist at Societe Generale. “Despite it all, Fed officials are signaling the peak of rates has been reached and keeping the debate on pace and timing of cuts down the road.”

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