Tokyo, Jun 19 (AP) Asian shares retreated Thursday as worries persisted about conflict in the Middle East.

Ratcheting up tensions, President Donald Trump warned of the possibility of getting directly involved in the conflict with Israel, while Iran's supreme leader rejected US calls for surrender.

Oil prices and US futures declined.

In Asian trading, Japan's benchmark Nikkei 225 shed 0.7 per cent to 38,619.17. Shares in Japan's Nippon Steel Corp. rose 0.8 per cent after it announced that its acquisition of US Steel, which met US government opposition for more than a year, was finally completed.

Hong Kong's Hang Seng dropped 2 per cent to 23,231.48 on heavy selling of tech-related shares, while the Shanghai Composite lost 0.9 per cent to 3,359.78.

Australia's S&P/ASX 200 was little changed at 8,528.30 and in South Korea, the Kospi lost 0.4 per cent to 2,960.81.

US financial markets will be closed Thursday for the Juneteenth holiday.

On Wednesday, US stocks drifted to a mixed finish after the Federal Reserve indicated it may cut interest rates twice this year, though it's far from certain about that.

The S&P 500 finished nearly unchanged at 5,980.87. The Dow Jones Industrial Average dipped 0.1 per cent to 42,171.66, and the Nasdaq composite rose 0.1 per cent to 19,546.27.

Treasury yields also wavered but ultimately held relatively steady after the Fed released projections showing the median official expects to cut the federal funds rate twice by the end of 2025.

That's the same number they were projecting three months ago, and it helped calm worries a bit that inflation caused by Trump's higher tariffs could tie the Fed's hands.

Cuts in rates would make mortgages, credit-card payments and other loans cheaper for US households and businesses, which in turn could strengthen the overall economy. But they could likewise fan inflation higher.

So far, inflation has remained relatively tame, and it's near the Fed's target of 2 per cent. But economists have been warning it may take months to feel the effects of tariffs. And inflation has been feeling upward pressure recently from a spurt in oil prices because of Israel's fighting with Iran.

Fed Chair Jerome Powell stressed on Wednesday that all the uncertainty surrounding tariffs means the median forecast for two cuts to interest rates this year could end up being far from reality. “Right now it's just a forecast in a very foggy time,” he said.

Fed officials are waiting to see how big Trump's tariffs will ultimately be, what they will affect and whether they will drive a one-time increase to inflation or something more dangerous. There is also still deep uncertainty about how much tariffs will grind down on the economy's growth.

“Because the economy is still solid, we can take the time to actually see what's going to happen,” Powell said.

“We'll make smarter and better decisions if we just wait a couple months or however long it takes to get a sense of really what is going to be the passthrough of inflation and what are going to be the effects on spending and hiring and all those things.” A report released Wednesday said fewer workers applied for unemployment benefits last week, possibly indicating fewer layoffs. But another said homebuilders broke ground on fewer homes last month than economists expected. That suggests higher mortgage rates may be casting a chill on the industry.

In other dealings early Thursday, benchmark US crude declined 10 cents to USD 73.40. Brent crude, the international standard, fell 24 cents to USD 76.46 a barrel.

Oil prices have been yo-yoing as fears rise and ebb that the conflict between Israel and Iran could disrupt the global flow of crude. Iran is a major producer of oil and also sits on the narrow Strait of Hormuz, through which much of the world's crude passes.

In currency trading, the US dollar fell to 145.05 Japanese Yen from 145.13 Yen. The Euro cost USD 1.1468, down from USD 1.1484. (AP) NPK NPK