(Sharecast News) - Asia-Pacific markets traded lower on Monday as a surge in oil prices and escalating geopolitical tensions weighed on sentiment following reports that the US was preparing a naval blockade on Iranian ports.
As Patrick Munnelly, market strategy partner at TickMill, noted, "oil prices surged while stocks and bonds suffered after President Trump announced the United States' plan to implement a comprehensive naval blockade of the crucial Strait of Hormuz, accompanied by a stern warning of retaliation in case of Iranian resistance."
The breakdown of US-Iran talks over the weekend in Islamabad reignited concerns that the conflict could drag on, with investors bracing for prolonged disruption to global energy markets.
Oil prices jumped sharply, with Brent crude futures last up 7.92% on ICE at $102.74 per barrel, and the NYMEX quote for West Texas Intermediate climbing 8.14% to $104.43, intensifying fears of inflationary pressure on regional economies.
Munnelly added that "following failed negotiations between Washington and Tehran over the weekend, oil and natural gas prices soared, further exacerbating an ongoing global energy crisis that has rattled markets worldwide."
Most Asian bourses in the red
In Japan, the Nikkei 225 fell 0.74% to 56,502.77, while the broader Topix declined 0.45% to 3,723.01.
Losses were led by Toto, which dropped 7.15%, alongside Sumitomo Electric Industries, down 6.18%, and Ibiden, which slid 5.08%.
The declines came as bond markets also reacted to rising energy-driven inflation concerns, with Munnelly noting that "Japan's 10-year yield climbed to 2.49%, marking its highest point since 1997, amid concerns that escalating energy prices could stoke inflation."
Chinese markets were more resilient, with the Shanghai Composite edging up 0.06% to 3,988.56 and the Shenzhen Component gaining 0.69% to 14,407.86.
Gains in Shanghai were driven by Jiangsu Jiangnan High Polymer Fiber Co, up 10.2%, Hua Yuan Property Co, which rose 10.19%, and Beijing Jingyuntong Technology Co, up 10.12%.
However, economic data disappointed, with new yuan loans in March coming in at CNY 2.99trn, below estimates of CNY 3.4trn.
Total new lending for the first quarter reached approximately CNY 8.6trn, down from around CNY 9.8trn a year earlier, signalling weaker-than-expected credit demand despite typically strong first-quarter lending tied to policy support and the Lunar New Year period.
In Hong Kong, the Hang Seng Index fell 0.9% to 25,660.85, dragged lower by JD Health International, which dropped 9.43%, Alibaba Health Information Technology, down 5.39%, and Laopu Gold Co, which declined 3.98%.
South Korea's Kospi 100 lost 0.95% to 6,689.98, with Hanjinkal down 6.46%, Hankook Tire falling 5.54%, and LG Innotek slipping 4.87%.
Reflecting the broader regional tone, Munnelly said "Asian markets experienced a 1.1% decline, and S&P 500 futures fell by 0.7%, as rising oil prices raised alarms about potential strains on global economic growth."
Markets fall down under as well
In Australia, the S&P/ASX 200 fell 0.39% to 8,926.00, led lower by A2 Milk Company, which plunged 12.99%, Life360, down 8.06%, and Orora, which dropped 6.73%.
Across the Tasman Sea, New Zealand's S&P/NZX 50 declined 1.22% to 13,020.18, with A2 Milk Company falling 12.4%, Tourism Holdings down 8.33%, and KMD Brands losing 4.17%.
Dollar stronger on regional peers
Currency markets reflected a stronger dollar, with the greenback rising 0.28% on the yen to trade at JPY 159.72, as it gained 0.22% against the Aussie to AUD 1.4183, and climbing 0.14% on the Kiwi to change hands at NZD 1.7154.
Munnelly added that "the dollar, which has served as a safe haven during the ongoing conflict, gained strength against all major currencies."
Investor sentiment remained fragile as US president Donald Trump reportedly considered resuming airstrikes on Iran after previously agreeing to a temporary two-week ceasefire, raising the prospect of further escalation in the region and sustained volatility across global markets.
As Munnelly put it, "the six-week conflict continues to cast a long shadow over the markets, reinforcing a now-familiar trend: equity and bond prices are retreating while the Dollar gains ground on the back of rising energy costs."
Reporting by Josh White for Sharecast.com.
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