Asian shares rallied on Wednesday as oil prices paused their gains, with markets turning to the U.S. Federal Reserve meeting to assess how policymakers will balance growth and inflation risks amid conflict in the Middle East. Israel intensified its offensive by killing Iran's security chief, while Iran renewed strikes on regional oil facilities. A senior Iranian official said the new supreme leader had rejected de-escalation offers conveyed by intermediaries, signalling no quick end to a war that has triggered a global oil shock. Oil prices took a breather on Wednesday after the Iraqi government and Kurdish authorities reached a deal to resume oil exports via Turkey's Ceyhan port, though the Strait of Hormuz remained largely closed. Brent crude futures dropped 2.2% to $101.09 a barrel, while U.S. West Texas Intermediate crude fell 3.3% to $93.05. That offered some relief to equity investors, with MSCI's broadest index of Asia-Pacific shares outside Japan up 1.6% as South Korea surged more than 4%. Japan's Nikkei also rallied 2.6%. Chinese blue chips bucked the trend, falling 0.5%. Natasha Kaneva, head of global commodities research at JPMorgan, said apparent stability in Brent and WTI reflected a temporary buffer created by regional inventory overhang, benchmark composition and policy intervention. "If the Strait does not reopen ... Brent and WTI will ultimately reprice higher as Atlantic basin inventories are drawn down and the global market is forced to clear at a materially tighter supply level," she said. S&P 500 futures rose 0.4% and Nasdaq futures gained 0.5%, supported by expectations of strong earnings from chipmaker Micron Technology due later on Wednesday. Investors will be watching for commentary on chip shortages and pricing. Reports that Nvidia had won Chinese approval to sell its second-most powerful artificial intelligence chips also boosted sentiment. In Europe, EUROSTOXX 50 futures were up 0.6%. FOCUS TURNS TO THE FED AND POWELL After the Reserve Bank of Australia kicked off a busy week for global central banks with an interest rate hike, all eyes are now on the Fed's policy meeting later in the day. Attention will focus on updated economic forecasts, especially the "dot plot", where the risk is that it may no longer project any rate cuts at all this year. The Fed is widely expected to keep policy steady, but the debate will centre on whether conflict with Iran is likely to disrupt economic growth, fuel more persistent inflation, or create a difficult mix of slower growth and rising prices. Fed Chair Jerome Powell will also hold a press conference, and markets will be watching for any indication of whether he intends to remain on the Board as a governor once his term as chair ends in May. "Consensus still points to the median dot plot showing one 25-basis-point cut for 2026, aligning with current market pricing," said IG analyst Tony Sycamore. "That said, there's a decent chance the dots could shift more hawkish, perhaps even to zero cuts, if the committee views the oil shock as leading to stickier inflation." The Bank of Canada also meets on Wednesday, where market participants expect no policy change and wager that the next move will be up, with one hike fully priced in by year-end. In currency markets, the U.S. dollar was down 0.2% to 158.7 yen for a third straight session of decline. The euro held at $1.1541 after rising 0.3% overnight. Treasuries extended gains, helped by a solid auction of 20-year Treasury bonds. Yields on 10-year Treasury notes fell 2 basis points to 4.1790%, the third straight session of decline, moving away from a recent peak of 4.29%.