Bonds & Stocks Drop as US-Iran Rhetoric Sharpens – Asia Market Wrap

A sell-off in equities, gold, and bonds deepened as the US and Iran sharpened their rhetoric and signalled a potential escalation in their confrontation, which is in its fourth week.

Asian stocks sank for the third day in a row, with bonds selling off as the prolonged battle threatened to boost inflation, hamper GDP, and force central banks to contemplate raising interest rates. Futures contracts showed that Asian losses would spread to Europe and the US. Gold fell around 4% to slightly above $4,300 an ounce, wiping out its year-to-date gains.

While the reaction to the new escalation in rhetoric was more obvious in stocks, it was less so in oil markets. Brent remained volatile throughout the Asian session, trading between gains and losses. Brent and WTI are both up more than 70% this year.

The concern was reflected in the MSCI Asia Pacific Index, which lost 3.5%. Japanese stocks lost 3.4%, while South Korean stocks fell 6.3%. The MSCI All Country World Index, the biggest measure of global equities, is down 3.9% this year. Asian stocks have cut their annual gains to less than 1%.

Markets remained turbulent across assets. The South Korean Won plunged to its lowest level since 2009, and the Indian Rupee set a new record low. Gold fell 4%, marking the longest losing run since October 2023, as mood remained shaky at the start of the week.