Oil prices surged and Asian equity markets declined sharply on Monday following US-Israeli military strikes on Iran that killed senior Iranian officials, intensifying geopolitical tensions in the crude-rich Middle East.
Brent crude briefly spiked over 14 percent and West Texas Intermediate nearly 12 percent in early trading. The attacks have disrupted a key global oil transit route, with the Strait of Hormuz—which handles about 20 percent of the world’s seaborne oil—effectively shut down after multiple shipping incidents. Iran’s Revolutionary Guards have warned against transiting the waterway, and major shipping firms have suspended passages, raising fears of prolonged supply disruptions.
Across Asia, stock indexes in Tokyo, Hong Kong, Singapore, Mumbai, Bangkok, Wellington and Taipei fell sharply. US futures also pointed to losses. Airline stocks were particularly hard hit due to flight cancellations to the region; Cathay Pacific fell 3 percent, Qantas dropped 5.4 percent, and Singapore Airlines declined 4.3 percent. In contrast, energy producers rallied, with Australia’s Woodside Energy and Santos jumping over 6 percent each, and Japan’s Inpex rising similarly.
Safe-haven assets gained value, with gold climbing 2 percent and the US dollar strengthening against major currencies. While initial panic trading eased somewhat—with crude settling around 5 percent higher and stocks paring some losses—analysts warned that sustained high oil prices could complicate global inflation control. “Higher oil prices raise the risk of stickier headline inflation,” said Charu Chanana of Saxo Markets, noting the potential for the US Federal Reserve to adopt a more cautious stance on interest rate cuts.
The conflict risks extending beyond Iran’s borders. Iran has launched retaliatory missile and drone attacks in the Gulf, while Israel targeted Lebanon after Hezbollah, an Iran-backed group, fired rockets. Market observers highlighted the economic vulnerability. “High oil prices are the Achilles heel of Trump,” said Michelle Brouhard of Kpler, suggesting Iran may seek to keep crude prices elevated to pressure the US administration, which has pledged low fuel costs ahead of upcoming elections.
If the Strait of Hormuz blockade persists, even strategic petroleum reserves may be insufficient to bridge the supply gap, according to Amena Bakr of Kpler, who predicted crude could test $90 per barrel. The broader economic impact includes soaring gas prices—Qatar is a major LNG exporter—higher shipping costs, and damage to air transport revenue, which could collectively drag on global growth. Economist Eric Dor of IESEG School of Management cautioned that a prolonged disruption would have a “recessionary effect.”
At approximately 0700 GMT, Brent crude was up 7.9 percent at $78.63 per barrel, while the Tokyo Nikkei had closed down 1.4 percent. The market volatility underscores the deep interconnection between geopolitical instability in the Middle East and global financial markets, with the situation’s evolution closely tied to the duration of the Strait of Hormuz closure and further military escalations.
