Asian stock markets declined sharply on Monday after escalating conflict in the Gulf and Iran’s claim that it had closed the Strait of Hormuz reignited concerns over global energy supplies. The geopolitical tensions triggered a sharp rally in crude oil prices, raising fresh fears of higher inflation, tighter monetary policies and slower global economic growth.
Brent crude oil surged 4.1% to $79.11 per barrel, while U.S. West Texas Intermediate (WTI) crude also gained 4.1% to $74.37 per barrel. The sharp increase follows concerns that disruptions in the Strait of Hormuz—one of the world’s busiest oil shipping routes—could significantly impact global crude supplies.
Investor sentiment weakened across global equity markets as higher oil prices revived concerns that central banks, particularly the U.S. Federal Reserve, may maintain higher interest rates for longer to combat inflation. Market participants are also closely watching upcoming U.S. inflation data and Federal Reserve Chair Kevin Warsh’s first Congressional testimony for further policy signals.
Asian markets reacted negatively to the uncertainty. Japan’s Nikkei 225 fell 1.6%, while the broader MSCI Asia-Pacific Index excluding Japan declined 0.9%. South Korea witnessed the steepest losses, with its benchmark index dropping 5.4% as technology and semiconductor stocks came under heavy selling pressure following last week’s sharp correction.
Futures markets also pointed to a weaker opening in the United States and Europe. S&P 500 futures slipped 0.4%, while Nasdaq futures fell 0.9%, reflecting concerns over the impact of rising energy prices on corporate earnings and economic growth.
Despite the broader market weakness, analysts remained optimistic about the long-term outlook for technology stocks, particularly companies benefiting from artificial intelligence (AI). Citi analysts maintained an overweight stance on global technology shares, citing strong earnings growth and continued investment in AI infrastructure. However, other analysts cautioned that the rapid pace of AI-related capital expenditure could pressure cash flows for major technology companies.
Bond markets also reflected changing investor expectations. Rising oil prices pushed the U.S. two-year Treasury yield to its highest level since early 2025, while the U.S. dollar strengthened against major currencies as investors anticipated a more hawkish Federal Reserve stance.
The euro weakened slightly against the dollar due to Europe’s greater dependence on imported energy, while the British pound also slipped ahead of key political developments in the United Kingdom.
Meanwhile, the rise in bond yields reduced demand for safe-haven assets such as gold, with the precious metal falling 1.1% despite the heightened geopolitical tensions.
Financial markets are expected to remain volatile in the coming days as investors closely monitor developments in the Gulf, oil supply conditions, corporate earnings and upcoming economic data that could influence global monetary policy.
Disclaimer: This report has been editorially prepared using publicly available information. While every effort has been made to ensure accuracy, unintentional errors or omissions may occur. Readers are encouraged to verify important information through official sources.
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