Stock markets across Asia fell on Monday as escalating conflict involving Iran drove oil prices sharply higher, fuelling fears of inflation and a potential global recession, with investors reacting to disruption risks in the Strait of Hormuz and prolonged hostilities.
Japan’s Nikkei dropped 3.4%, South Korea’s benchmark fell 3.0%, and a broad Asia-Pacific index lost 1.3%. European futures also pointed lower.
Meanwhile, oil prices jumped to multi-year highs, with Brent crude nearing $116 a barrel, on track for its biggest monthly rise since the 1990 Gulf War.
Analysts said the surge reflects mounting risks to global supply as key shipping routes face disruption.
“The longer the Strait remains closed, the sharper the drawdown in supplies,” JPMorgan economist Bruce Kasman warned, adding that oil could rise towards $150 a barrel if disruption continues.
The latest spike followed a weekend of escalation. Iran-aligned Houthi forces launched missiles and drones at Israel, while attacks were also reported on regional energy infrastructure, including damage to Oman’s Salalah terminal.
At the same time, the Strait of Hormuz, a critical route for global oil supplies, remains heavily disrupted, with shipping and insurance activity severely curtailed.
The U.S. has increased its military presence in the region, deploying thousands of additional troops, while Iran warned against any potential ground offensive.
Pakistan said it is preparing to host talks aimed at easing tensions, though markets remain sceptical about the prospects for a near-term ceasefire.
Rising energy costs are feeding into expectations of higher inflation and tighter monetary policy.
Analysts warned the shock could tip major economies towards stagflation, with one noting the conflict is now “a powerful driver of global risk” as markets struggle to price its trajectory.
Despite the volatility, traditional safe havens have offered limited relief, underscoring the uncertainty facing investors as the conflict shows little sign of easing.
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