Asian stock markets tumbled Wednesday as oil prices extended sharp gains driven by the war involving the United States and Israel against Iran, heightening fears of renewed global inflation and delaying hopes for interest rate cuts, according to Agence France-Presse.
Regional equities headed toward a third consecutive day of losses as investors reacted to rising crude prices and the prospect that higher energy costs could weigh on economic growth across energy-dependent Asian economies.
The selloff came as joint strikes on Iran entered a fifth day, fueling concerns that disruptions to crude flows from the Middle East could intensify and push oil prices even higher.
West Texas Intermediate crude has surged about 12 percent to more than $75 a barrel since last Friday before the attacks began, while Brent crude has climbed more than 13 percent to above $82.
Some analysts have warned prices could reach $100 a barrel if the conflict continues to threaten supplies.
Investors are closely watching the Strait of Hormuz, a critical maritime route through which roughly a fifth of global oil supply passes.
U.S. President Donald Trump said the U.S. Navy could escort oil tankers through the strait if needed and ordered Washington to provide insurance for shipping, offering some relief to traders after a sharp rally earlier in the week.
Still, Iranian strikes on neighboring countries raised fears the conflict could widen, while reports that some oil fields in the region had been closed continued to put upward pressure on crude prices.
Market losses were steep across the region.
South Korea’s Kospi index dropped more than eight percent, triggering a brief trading suspension after it had already plunged more than seven percent in the previous session following a long weekend.
Japan’s Nikkei 225 fell more than three percent, while Hong Kong’s Hang Seng Index slid 1.8 percent and Shanghai’s Composite Index dropped 0.6 percent.
Technology companies were among the hardest hit as investors retreated from riskier assets.
In Japan, chipmakers Advantest and Tokyo Electron fell more than four percent, while Seoul-listed Samsung Electronics and SK hynix declined 7.3 percent and 5.6 percent respectively.
“Asian equities are now staring at a third consecutive day of losses and the reason is not mysterious,” said Stephen Innes of SPI Asset Management.
“When crude edges higher, the invoice lands hardest in Asia, where imported energy is not just a line item but a structural dependency.
“Export-driven economies suddenly find themselves recalculating margins with a more expensive barrel sitting quietly in the background of every factory floor and shipping lane.”
The downturn in Asia followed sharp losses in Europe, where London’s FTSE 100 fell 2.8 percent and both Frankfurt and Paris dropped more than three percent as natural gas prices surged to their highest levels since Russia’s invasion of Ukraine.
Analysts said the surge in energy costs could complicate monetary policy decisions, as central banks including the U.S. Federal Reserve and the European Central Bank remain cautious about easing policy while inflation pressures persist.
