Major stock markets in Asia slumped on Monday after Washington and Tehran threatened to intensify hostilities, as the Iran war entered its fourth week.
Japan's benchmark Nikkei 225 index was 3.4% lower in morning trade, while South Korea's Kospi fell by almost 5%.
US President Donald Trump warned on Saturday that he would obliterate Iranian power plants if Iran did not allow free passage through the key Strait of Hormuz shipping route. In response, Iran pledged to retaliate by targeting regional infrastructure, including energy facilities.
The conflict has hit Japan and South Korea particularly hard, given their heavy dependence on oil and gas that typically transit through the strait. Iran has effectively blocked this critical channel since US and Israeli attacks commenced on February 28.
About 20% of the world's oil and liquefied natural gas (LNG) usually passes through the Strait of Hormuz, and the war has caused global fuel prices to soar.
On Monday, International Energy Agency chief Fatih Birol warned that we could be facing the worst energy crisis in decades, likening the current situation to the oil crises of the 1970s and the impact of Russia's invasion of Ukraine in 2022. This crisis, as things stand, is now two oil crises and one gas crash put together, he stated.
Trump's ultimatum to Iran came after missiles were launched from Iran towards Israeli targets, heightening the already escalated tensions in the region. If Iran's infrastructure is attacked, Iranian officials have vowed that energy and desalination facilities will be irreversibly destroyed, potentially leading to a significant escalation of the conflict.
Other Asia-Pacific markets mirrored these declines, with Hong Kong’s Hang Seng down 2.5% and Taiwan's Weighted Index losing 2%. Global oil prices remained steady, with Brent crude slightly down at $112 a barrel, and US-traded oil up by 0.3% to $98.57.
