Stocks Slide as Fresh US Strikes on Iran Lift Oil – Asia Market Wrap
Stocks and government bonds declined after fresh US strikes on Iran pushed oil prices higher and strengthened expectations that the Federal Reserve may need to raise interest rates.
MSCI’s Asia Pacific equity index fell 1.8%, with South Korea’s Kospi tumbling 8%. Technology stocks remained under pressure, with SK Hynix plunging 13% in Seoul after its US-listed American depositary receipts jumped 13% during their trading debut on Friday. Nasdaq 100 futures dropped 1.3%, while European stocks were set to open about 1% lower.
Brent crude surged 4.3% to $79.25 a barrel as conflicting reports surrounding the Strait of Hormuz fueled concerns over potential supply disruptions. Government bonds weakened across the curve, with the yield on the rate-sensitive two-year Treasury note climbing to its highest level since February 2025.
The dollar, which has served as a safe haven throughout the Middle East conflict, strengthened against all major peers as higher oil prices reinforced expectations that the Fed may tighten policy further to contain inflation. Rising rate expectations reduced the appeal of non-yielding assets, sending both gold and silver lower.
With investors once again focused on geopolitical risks, markets face a pivotal week. The start of earnings season will test whether companies can deliver the profit growth needed to justify the AI-driven rally, while US inflation data and Federal Reserve Chair Kevin Warsh’s congressional testimony will provide fresh insight into the outlook for interest rates.
Elsewhere, precious metals weakened, with gold falling 1.6% to around $4,055 an ounce and silver dropping nearly 3% to about $58.20 an ounce.
Government bonds in Japan and Australia also declined. The yield on the two-year US Treasury note rose two basis points to 4.23%, while a broad gauge of the US dollar gained 0.1%.
Risk appetite deteriorated across markets, with Bitcoin falling more than 2% to around $62,700, leading a wider selloff in cryptocurrencies.
The US military said it launched strikes on Iran on Sunday aimed at further reducing the country’s ability to attack civilian vessels transiting the Strait of Hormuz. The operation followed Iranian drone and missile attacks on US allies, including Kuwait, Jordan and Qatar.
