HONG KONG (Reuters) – Asian shares dropped on Wednesday, reversing early gains, after an overnight rebound in U.S. and European stocks as investors shrugged off worries about a potential U.S. government debt default, while oil paused near new multi-year highs.

The gains in oil are driven by concerns about energy supply, and come two days after the OPEC+ group of producers stuck to its planned output increase rather than raising it further.

U.S. crude rose to its highest level since 2014 on Wednesday but pared gains and was last off 0.09% to $78.87 a barrel. Brent crude lost 0.08% to $82.49 per barrel, having hit a three-year high in the previous session.

“OPEC’s outlook suggests further reductions in global oil stockpiles. That’s a problem given that oil inventories are already low,” wrote analysts at CBA in a note.

Rising prices could threaten the global economic recovery as global oil demand growth was picking up as economies re‑opened on the back of rising vaccination rates, they added.

In equity markets, MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.6%, reversing early gains, while Japan’s Nikkei lost 0.78%.

Traders say markets are jittery due to worries about China’s real estate market as well as approaching higher interest rates around the world.

There were falls in Hong Kong off 1%, Korea down 0.9% and Australia down 0.45%.

U.S. stock futures, the S&P 500 e-minis shed 0.44%.

Chinese markets remained closed for a public holiday, and shares of cash-strapped Chinese developer China Evergrande were suspended having stopped trading on Monday pending an announcement of a significant transaction.

Uncertainty about Evergrande’s fate roiled Chinese property developers’ bonds and Hong Kong-listed shares and bonds on Tuesday following fresh credit rating downgrades.

Elsewhere, New Zealand’s central bank raised interest rates by 25 basis points but reaction was muted as the move to increase the cash rate to 0.50% was widely expected.

The announcement caused the New Zealand dollar to rise about 0.1%, before falling 0.34%.

Overnight the Dow Jones Industrial Average rose 0.92%, the S&P 500 gained 1.05% and the Nasdaq Composite climbed 1.25%, despite worries that the United States will default on its debt. [.N]

The Senate will vote on Wednesday on a Democratic-backed measure to suspend the U.S. debt ceiling, a key lawmaker said on Tuesday, as partisan brinkmanship in Congress risks an economically crippling federal credit default.

These fears, however, did help push the dollar back towards its 12-month highs and benchmark treasury yields to near their highest level since mid June.

In Asian trading, the dollar hovered close to its highs for the year against a basket of its peers, while the euro EUR=EBS stayed near its 14-month low struck last week.

The safe-haven yen JPY=EBS fell about 0.5%, reflecting a positive mood in equity markets.

The yield on benchmark 10-year Treasury notes rose to 1.5466%, nearing a four-month high of 1.5670% hit in late September.

Spot gold shed 0.15% to $1757.3 an ounce, with the non-interest bearing asset hurt by higher yields.

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