Asian equity markets rallied Monday as investors weighed a resilient U.S. labor market against the prospect of higher borrowing costs, while crude prices extended gains after fresh military strikes between the United States and Iran in the Gulf. Japan's Nikkei 225 rose 2%, South Korea's Kospi climbed 3% and the MSCI index of Asia-Pacific shares outside Japan advanced 0.9%. The moves followed a U.S. payrolls report released on September 2 that pointed to continued strength in the world's largest economy. Traders now price a 58% probability of a Federal Reserve rate increase at its September 16 meeting and a 70% chance of a move in October. Attention is turning to Friday's U.S. consumer price index report, with median forecasts for a 0.2% increase in core prices and some economists seeing a 0.3% risk. The 10-year Treasury yield stood at 4.784%, near its highest level since late 2023, and could approach 5% if inflation is hotter than expected. Bruce Kasman, global head of economics at JPMorgan, expects core CPI to rise 0.21%, which he said would be soft enough to keep the Fed on hold for now. He also expects two more increases from the European Central Bank and the Bank of Japan before year-end, while seeing a case for the Fed to act earlier and more aggressively than his baseline forecast of a December hike. The ECB is widely expected to raise its deposit rate to 2.75% on Thursday, with futures implying a 75% chance of another quarter-point increase to 3% by December. Markets assign the Bank of Japan a 75% probability of a quarter-point increase at its September 18 meeting and a 60% chance of another move before year-end. Oil prices rose after the United States struck three Iranian tankers and Iran's Islamic Revolutionary Guard Corps launched ballistic missiles at two U.S. Navy ships. Brent crude gained 0.2% to $96.45 a barrel after rising nearly 10% in the week ended September 6, while U.S. crude added 0.4% to $91.85. Tehran said it would announce a restricted zone outside the Strait of Hormuz in the coming days. India's Nifty 50 and Sensex diverged from the broader regional rally, recording their fourth consecutive weekly declines as foreign investors withdrew 7,443 crore rupees in the first week of September. Investors face a week of major policy decisions and data releases, with energy prices linked to the Gulf conflict remaining a key risk for central-bank policy.