By Xie Yu

HONG KONG (Reuters – Asian equities were slightly higher Tuesday thanks to gains in banking, energy and mining stocks. This was as investors prepared for U.S. rate increases and war on oil.

Asia’s oil futures rose by nearly 3%, reaching a 2-week peak.

After U.S. Federal Reserve Chairman Jerome Powell announced on Monday that a tighter monetary policy was being pursued than expected, the Japanese yen fell below the crucial 120 level.

The broadest MSCI index of Asia-Pacific shares, outside Japan, rose 0.2% due to gains in Australia’s mining-and-bank heavy Index

Increased 1.7% to 27,276 ()

“This sharp rise in commodity prices actually has relatively mixed effects… because there are some notable commodity exporters here in the region, who could possibly benefit,” stated Manishi Raychaudhuri (OTC) Asia-Pacific equity strategist, BNP Paribas.

He stated that “investors are coming around to the realization that central banks of developed market countries would normalize monetary policy.”

Powell caused bond panic overnight when he stated that the U.S. central banks were ready to take on inflation and would use larger than usual hikes if required.

Treasuries, U.S. stock options and futures were on the edge with a 0.3% drop and a 0.4% rate-sensitive decline respectively. Benchmark 10-year Treasury yields soared to 2.3330%, almost three years after their peak. [US/]

Fed funds futures currently price in a 2/3 chance for a 50-basis point rate rise in May.

Japan’s yen was also affected by rising U.S. rates. It fell to 120 per dollar briefly before being last bought at 119.90. [FRX/]

The Chinese market, however, is awaiting policy easement after being flagged last week by authorities.

China’s blue-chip index was 0.2% lower than Hong Kong’s benchmark, while its benchmark rose 0.7%.

Hong Kong shares of China Eastern Airlines fell 5.5% Monday after their Boeing (NYSE) 737-8800 aircraft with 132 passengers crashed into mountains in Southern China.

The sentiment was weighed down by a slowdown in Russia-Ukraine peace talks. As Russia demanded that Ukraine stop supporting Mariupol, conflict raged as Ukraine refused to obey their ultimatums.

On Tuesday, oil futures gained on the news that members of the European Union were looking at imposing sanctions against Russian oil. Also, market jitters were triggered by attacks on Saudi oil facilities. [O/R]

Barrel price rose 2.9%, to $118.93 A barrel rose by 2.4% to $114.85

The yen was down 0.4%, reaching 120.08 USD in the early Asia trade.

The euro fell 0.2% to $1.0992 in currency trade, after losing 2.09% over a month. Meanwhile, the was at 98.758.

At $1930.27 per troy ounce, gold was slightly cheaper