Asian shares slip and oil pares gains on Iran war uncertainties

HONG KONG (AP) — Asian stocks declined Tuesday, tracking losses on Wall Street after U.S. stocks retreated from record highs.

Oil prices fell back after rising earlier on escalating tensions in the war between the U.S. and Iran.

U.S. futures edged 0.1% higher.

Regional trading was thin, with markets in Japan, South Korea and mainland China closed for holidays.

Hong Kong’s Hang Seng fell 1.1% to 25,805.98. Australia’s S&P/ASX 200 lost 0.5% to 8,649.80, while Taiwan’s Taiex traded 0.2% lower at 40,626.22.

The fragile ceasefire between the U.S. and Iran was tested Monday after the U.S. military said it had sank six Iranian small boats targeting civilian ships, while two U.S.-flagged ships successfully passed through the Strait of Hormuz.

The key waterway for oil and gas tranport remains largely closed despite repeated demands from the U.S. for Iran to reopen the strait and as the United States imposed a sea blockade on Iranian ports. U.S. President Donald Trump's “Project Freedom” plan under which the United States would help guide stranded ships through the Strait of Hormuz began on Monday.

Brent crude, the international standard, fell $1.22 to $113.22 per barrel. It surged above $114 a barrel on Monday, gaining nearly 6%. Before the war began in late February, it was trading near $70.

Benchmark U.S. crude slipped $2.08 to $104.34 per barrel.

Talks on a permanent end to war have stalled. Tensions escalated when the United Arab Emirates, a U.S. ally, said it came under attack from Iran for the first time since the ceasefire last month.

“We are seeing the first signs of the ceasefire between the U.S. and Iran breaking down amid a re-escalation in the Persian Gulf,” ING Bank analysts Warren Patterson and Ewa Manthey wrote in a note Tuesday.

“Continuation of 'Project Freedom' risks further escalation,” they wrote. “Any relief from stranded vessels making their way through the Strait will be temporary, with very few inbound vessels moving into the Persian Gulf.”

On Monday, Wall Street closed lower with the benchmark S&P 500 slipping 0.4% from its latest record heights to 7,200.75. The Dow Jones Industrial Average fell 1.1% to 48,941.90, while the technology-heavy Nasdaq composite dropped 0.2% to 25,067.80.

The U.S. dollar rose to 157.27 Japanese yen from 157.25 yen. The euro was trading at 1.1687, down from $1.1689.

AP Business Writers Stan Choe and Matt Ott contributed.