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Asian equities were mixed on Wednesday, with attention turning to the Federal Reserve's key policy decision later in the day, while investors remain on alert for developments in the Middle East after the attack on Saudi oil facilities rocked markets.
Crude prices tumbled Tuesday and were almost unchanged in Asia following news that Riyadh will get its two major installations back online earlier than expected, though analysts said there was nervousness on trading floors about oil security in the future.
With fears low for now of a military retaliation against Iran - accused of being behind the strikes - focus is now on the Fed, which is expected to cut interest rates while its post-meeting statement will be closely followed for clues about future plans.
Global markets have spent most of this month rising on bets that central banks, led by the Fed, will move to a softer monetary policy to offset a slowdown in most economies exacerbated by the China-US trade war.
"A rate cut of 25 basis points is universally regarded as a done deal by global markets," said OANDA senior market analyst Jeffrey Halley.
"What will be closely watched is the press conference 30 minutes later, where we will gain more clarity as to whether the Fed has moved to an explicit easing bias.
"The likelihood of a shift from neutral to easing will be high as the (policy board) will not be able to ignore the storm cloud around the rest of the world that must eventually start raining on the United States."
Oxford Economics estimates the Fed will cut three more times this year, which would erase all its 2018 rate hikes.
The Fed has been forced to pump more than $100bn into US financial markets owing to a tightening of liquidity that had seen short-term lending rates spike for companies.
Equity traders shifted cautiously with Asian markets struggling for traction.
Hong Kong was flat after two days of steep losses that have been made worse by worries about long-running protests in the city. Tokyo finished 0.2% down after a 10-day winning streak. Sydney slipped 0.2% and Singapore fell 0.4% with Manila and Bangkok also off.
But Shanghai ended up 0.3%, Seoul added 0.4% and Taipei rose 0.5%, while Mumbai and Jakarta also rose.
Eyes on Pompeo
Dealers have been given some optimism by the US and China being about to restart trade negotiations next month, with a delegation from Beijing reportedly visiting Washington this week for preparatory talks.
However, there are fresh worries about the impact on the already stuttering world economy from the Saudi oil attacks on Saturday.
While the resumption of output from the world's biggest exporter provided some much-needed relief, observers said long-term energy security is now a concern.
"Restoring production may placate global investors' immediate economic concerns, but that's only half the problem as the attacks exposed some significant vulnerabilities," said Stephen Innes at AxiTrader.
"None more so than just how inadequately prepared the markets are for disruptions of this magnitude which suggest that the supply risk premium could stick around well after production is restored."
Eyes are on US Secretary of State Mike Pompeo, who departed for Saudi Arabia Tuesday to discuss possible retaliation, while Vice President Mike Pence said: "As the president said, we don't want war with anybody but the United States is prepared."
A US official, speaking on condition of anonymity, told AFP the White House has concluded the attack - claimed by Huthi rebels in Yemen - involved cruise missiles from Iran and that evidence would be presented at the UN General Assembly next week.
Daniel Hynes, a senior commodity strategist at Australia & New Zealand Banking Group, warned investors could be in for more shocks.
"The market is certainly setting itself up for a surprise, considering they aren't really pricing in that geopolitical risk premium at the moment."
In early trade London and Paris each fell 0.2%, while Frankfurt lost 0.1%.
