MSCI’s broadest index of Asia-Pacific shares outside Japan fell 1.5 per cent, extending losses for a second straight session. South Korea’s benchmark index slumped as much as 4.1 per cent in early trade, while Japan’s Nikkei 225 dropped 2.3 per cent
A global equity selloff deepened on Tuesday as investors assessed the fallout of coordinated US–Israeli strikes on Iran and the mounting risk of disruptions to global energy supplies.
MSCI’s broadest index of Asia-Pacific shares outside Japan fell 1.5 per cent, extending losses for a second straight session. South Korea’s benchmark index slumped as much as 4.1 per cent in early trade, while Japan’s Nikkei 225 dropped 2.3 per cent, reflecting broad-based risk aversion across the region.
The renewed risk-off mood comes as hostilities between the United States and Iran enter a fourth day, fuelling fears of a wider regional escalation and prolonged disruption to oil and gas flows through West Asia.
Uncertainty compounds market stress
“Economic policy uncertainty was already elevated and now with the Iran conflict, the geopolitical risk is expected to rise too,” Rupal Agarwal, Asia quant strategist at Bernstein in Singapore, told Reuters. “The last time both spiked was in 2022 during the Russia-Ukraine conflict, which did not bode well for Asian markets.”
On Wall Street, markets steadied after a volatile Monday session. The S&P 500 recovered from early losses to close flat, while the Nasdaq Composite gained 0.4 per cent as investors selectively bought into beaten-down technology stocks.
Still, sentiment remains fragile. US President Donald Trump defended what he described as a broad and open-ended military campaign against Iran, saying operations were progressing ahead of expectations. The absence of a clear diplomatic off-ramp has left investors bracing for sustained volatility.
An official from Iran’s Revolutionary Guards was quoted as saying the Strait of Hormuz had been closed to marine traffic, warning that vessels attempting to pass through would be targeted — a move that, if enforced, could severely disrupt global energy trade.
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Oil and freight rates surge
The threat to the Strait of Hormuz — a chokepoint that carries roughly a fifth of global oil and gas shipments — immediately reverberated across commodity and shipping markets.
Data from the London Stock Exchange Group showed that the cost of chartering a supertanker to transport crude from the Middle East to China surged to a record above $400,000 per day, underscoring acute supply-chain anxiety.
Brent crude futures rose another 2 per cent to $79.22 a barrel after sharp gains in the previous session. In natural gas markets, benchmark European and Asian liquefied natural gas (LNG) prices jumped about 40 per cent on Monday amid fears of supply constraints.
Analysts warn that sustained increases in oil and gas prices could stoke inflationary pressures globally, particularly in energy-importing Asian economies, complicating the policy calculus for central banks already navigating uneven growth and sticky price trends.
Dollar firms on haven demand
The US dollar strengthened against major peers as investors rotated into traditional safe-haven assets. Market participants said further escalation in West Asia could intensify capital outflows from emerging markets and keep equity valuations under pressure in the near term.
Investors are closely tracking developments around energy infrastructure, shipping routes and any signs of diplomatic engagement. Prolonged volatility in crude prices and freight rates risks deepening the equity rout and tightening global financial conditions.
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Conflict widens across region
Financial markets remain on edge as the confrontation between Iran, Israel and the United States broadens geographically.
The escalation began after coordinated US–Israeli strikes targeted Iranian military and strategic infrastructure over the weekend. In response, Iran launched missile and drone attacks across the Gulf, targeting Israeli positions and US-linked assets in Saudi Arabia and Iraq.
Tensions intensified after suspected Iranian drones struck the US Embassy in Riyadh, prompting fresh warnings of retaliation from Washington. Iran has reportedly carried out further strikes in the region, while Qatar said it intercepted multiple ballistic missiles and drones aimed at its territory.
Energy markets are particularly sensitive after Tehran threatened shipping through the Strait of Hormuz. Satellite imagery has indicated damage to the Ras Tanura oil refinery, one of the largest facilities operated by Saudi Aramco, amplifying concerns about supply stability.
The US Central Command has confirmed casualties among American personnel, while military exchanges have expanded beyond Iran and Israel to include Lebanon and Iraq. In Beirut, Israeli strikes reportedly hit infrastructure linked to Hezbollah, adding another layer of geopolitical risk to an already fragile global market backdrop.
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