Asia close: Investors very cautious due to geopolitical risks

Stocks were nearly uniformly lower due to the heightened geopolitical tensions in the Middle East and the potential for negative headlines.

In that regard, the Wall Street Journal reported overnight on multiple attacks on U.S. forces around the Middle East during the past week in Syria, Iraq and Yemen.

"While the attacks in Iraq and Syria led to minor injuries to individuals on the ground, these developments have raised concerns that the ongoing conflict between Israel and Hamas may escalate into a more extensive and widespread conflict in the Middle East," said Stephen Innes, managing partner at SPI Asset Management.

Japan's Nikkei-225 slipped 0.35% to 1,758.10 and the Shanghai Stock Exchange's Composite Index retreated 0.74% to 2,983.06.

Hong Kong's Hang Seng Index suffered a similar fall of 0.72% to 17,172.13.

South Korea's Kospi also declined, but by a larger 1.69% to 2,375.0.

Taiwan's TAIEX was relatively well behaved, drifting lower by just 0.07% to 16,440.72.

In the background, front-dated Brent was up by 0.8% to $93.18 a barrel, gold futures neared the $2,000 mark and the yield on the 10-year U.S. Treasury

On a mixed note, in a research note sent to clients overnight, BoA strategist Michael Hartnett said the firm's contrarian was now pointing to a trading rally, so long as the S&P managed to stay above the 4,200 point level.

He expected that to be the case, but there was a caveat, a trading rally was not the same as a "big low".

Their trading rules, three out of four of which were now giving off a contrarian 'buy' signal, "almost always" for trading rallies in the case of models based on one standard deviation, which encompassed about two-thirds of risk scenarios.

But in the case of two standard deviation exogenous shocks, such as the Lehman Brothers failure in 2008 or the Russia-Ukraine war in March 2022, that would "short-circuit" an oversold rally, Hartnett said.