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Markets tumble amid escalating US-Iran hostilities
Stock exchanges across Asia suffered sharp declines on Monday as Washington and Tehran exchanged threats of military strikes, deepening fears of a prolonged energy supply shock. The conflict, now in its fourth week, has disrupted critical oil shipping routes, sending fuel prices surging.
Key indices record steep losses
Japan's Nikkei 225 index closed 3.5% lower, while South Korea's Kospi dropped 6.5%-the steepest decline among major regional markets. In Europe, London's FTSE 100 opened 1.4% down, reflecting broader investor unease over the standoff's economic fallout.
Strait of Hormuz blockade fuels energy crisis
Iran has effectively sealed the Strait of Hormuz since late February, following military strikes by the US and Israel. The waterway, a vital artery for global energy trade, typically handles 20% of the world's oil and liquefied natural gas. The blockade has triggered a sharp rise in fuel prices, with analysts warning of a crisis rivaling historic disruptions.
"This crisis combines two oil shocks and a gas crash," said Fatih Birol, head of the International Energy Agency, during a speech in Canberra. He compared the situation to the 1970s oil embargoes and the 2022 energy fallout from Russia's invasion of Ukraine.
Fatih Birol, IEA Chief
US and Iran trade threats of infrastructure strikes
Tensions escalated over the weekend after US President Donald Trump warned Iran in a late-night social media post that America would "obliterate" its power plants if Tehran failed to reopen the Strait of Hormuz within 48 hours. The ultimatum followed Iranian missile strikes on Israeli cities Dimona and Arad.
Iran's parliamentary speaker, Mohammad Bagher Ghalibaf, responded on Sunday, vowing to target regional energy and desalination facilities if Iran's infrastructure came under attack. Such a move, analysts note, could further destabilize global supply chains.
Oil prices surge, stoking inflation fears
Brent crude climbed 1.1% to $113.40 per barrel on Monday, while US-traded oil rose 2.2% to $100.50. The price spike has raised concerns about rising household energy costs, particularly in the UK, where Prime Minister Keir Starmer convened an emergency Cobra committee meeting to address the crisis.
The committee, which includes Bank of England Governor Andrew Bailey, is expected to assess energy security risks and the war's impact on living costs. Starmer and Trump discussed the Strait of Hormuz standoff in a Sunday call, underscoring the urgency of restoring maritime traffic.
Analysts warn of further escalation
Simon Flowers, chairman of energy consultancy Wood Mackenzie, told the BBC that markets were bracing for potential US strikes on Iranian infrastructure. "If Washington follows through, the conflict's intensity will ratchet up another notch," he said. "We'll then see whether Iran retaliates with tit-for-tat attacks on regional assets, as it has in recent weeks."
