Global Markets: Asian stocks fall as Iran war keeps oil at $100, upends rate outlook

Asian stock markets fell sharply as the ongoing conflict involving Iran pushed oil prices close to $100 per barrel, heightening fears of inflation and reshaping expectations for global interest rates. Investors across the region reacted with caution, selling off equities amid rising uncertainty.

Major indices in Asia‑Pacific experienced notable losses. Japan’s Nikkei declined about 1.4%, while South Korea’s technology-heavy index dropped nearly 2%, reflecting concerns that higher energy costs could slow economic growth and squeeze corporate profits.

The surge in oil prices is largely linked to potential disruptions in energy supplies, particularly around the Strait of Hormuz, a crucial shipping corridor for global oil. Any threat to this passage can rapidly tighten supply and push prices higher, intensifying inflationary pressures worldwide.

Higher energy costs also complicate the outlook for central banks. Expectations that major institutions such as the U.S. Federal Reserve would cut interest rates this year have been scaled back, as elevated oil prices increase the risk of persistent inflation. Analysts now anticipate fewer and smaller rate cuts than previously forecast.

In response, safe-haven assets gained strength. The U.S. dollar rose as investors sought stability, and government bond yields increased in anticipation that interest rates may remain elevated for longer than expected.