BANGKOK — Global financial markets faced significant volatility on Monday following military strikes by the U.S. and Israel on Iran. U.S. futures declined sharply, with S&P 500 futures dropping 1.4% and Dow Jones Industrial Average futures falling 1.2%.
Asian markets mirrored the trend, recording broad losses. Hong Kong’s Hang Seng index fell 2% to 26,102.53, while Japan’s Nikkei 225 closed 1.4% lower at 58,057.24 despite gains in defense related stocks such as Mitsubishi Heavy Industries. In India, the Sensex dipped 1.8% amid fears of disrupted oil supplies, while markets in Taiwan, Singapore, and Thailand fell between 0.9% and 1.9%. Australia’s S&P/ASX 200 ended flat, and South Korea remained closed for a holiday. The Shanghai Composite rose 0.5%, boosted by oil sector gains from CNOOC and PetroChina.
Oil and Gold Surge Amid Geopolitical Uncertainty
The conflict sent crude prices soaring, with U.S. benchmark crude up 8% to $72.06 per barrel and Brent crude rising 8% to $78.69 per barrel. Gold also surged 2.7% to roughly $5,392 per ounce as investors sought safe-haven assets. The U.S. dollar strengthened to 156.99 Japanese yen, while the euro slipped to $1.1732. Analysts warn that potential disruptions in the Strait of Hormuz, a critical corridor for global oil and LNG flows, could further elevate energy prices.
Economic Implications and Future Outlook
Stephen Innes of SPI Asset Management highlighted the strategic importance of the Strait of Hormuz, noting it handles about one-fifth of global oil and LNG exports. RaboResearch Global Economics & Markets cautioned that any prolonged supply disruption could impact global markets, production costs, and oil-dependent economies. Iran, exporting around 1.6 million barrels of oil daily, may seek alternative routes if its exports are affected, further influencing energy prices.
Market sentiment has been partly buffered as investors anticipated the strikes, adjusting positions amid U.S. military buildup in the region. The focus of global markets has shifted from AI-driven concerns to the implications of the Middle East conflict. U.S. indices experienced additional pressure last week, with the S&P 500 down 0.4% for the second losing month in ten, Dow industrials down 1.1%, and Nasdaq dropping 0.9%. Treasury yields fell as investors favored safer assets amid rising wholesale inflation, which reached 2.9%, surpassing expectations.