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Asian equity markets fell sharply on Monday, tracking losses on Wall Street, as a [spike in crude oil prices ](https://www.moneycontrol.com/news/business/oil-price-surges-past-115-as-houthis-enter-west-asia-conflict-widening-war-stokes-supply-fears-13873922.html)and escalating tensions in the ongoing conflict involving the U.S., Israel and Iran dampened investor sentiment.
Japan’s benchmark Nikkei 225 dropped more than 4.5% in early trade, while South Korea’s Kospi slid over 3%. Hong Kong’s Hang Seng Index declined around 1.7%, and China’s Shanghai Composite edged lower by about 0.7%. Australia’s S&P/ASX 200 also traded in the red, reflecting broad-based weakness across the region.
The sell-off followed a bruising session in the U.S., where the S&P 500 fell 1.7%, capping its fifth consecutive weekly loss, the longest losing streak in nearly four years. The Dow Jones Industrial Average dropped 793 points, while the Nasdaq Composite declined 2.1%, dragged down by heavyweight technology stocks including Amazon and Nvidia.
Investor anxiety has been fuelled by surging energy prices, with Brent crude climbing to around $115–$116 a barrel and West Texas Intermediate rising above $100. The sharp increase, from roughly $70 per barrel before the conflict, has intensified concerns about inflation and the potential drag on global growth.
Market participants are particularly worried about disruptions to the Strait of Hormuz, a critical artery for global energy supplies that has been severely impacted by the conflict. Shipping constraints and attacks on energy infrastructure have tightened supply, amplifying volatility in oil markets.
“Although we do not expect the conflict to be protracted, we anticipate heightened volatility in the near term,” said Xavier Lee, senior equity analyst at Morningstar Research, as cited in by *AP*.
Analysts warn that sustained high oil prices could trigger broader economic stress. “The market is now reacting to higher crude pricing and the fallout in economic consequences,” said Chris Weston of Pepperstone, pointing to rising inflation expectations and supply concerns.
Adding to the unease are fears of further military escalation. Comments by [U.S. President Donald Trump ](https://www.moneycontrol.com/world/maybe-we-take-kharg-island-trump-signals-possible-us-move-on-iranian-crude-article-13873900.html)about likely action targeting Iran’s energy infrastructure, along with reports of increased US military deployments, have heightened the risk of a prolonged conflict.
Experts say the crisis is evolving into a broader economic threat. “There are three brewing crises in the financial world right now… The largest energy disruption in human history, with no off ramp in sight,” said [Ajay Bagga](https://www.moneycontrol.com/world/oil-gas-fertilisers-ajay-bagga-on-why-the-iran-conflict-may-be-working-in-russia-s-favour-article-13873957.html).
The United Nations has also flagged the global fallout, with Secretary-General Antonio Guterres announcing a task force to address disruptions to maritime traffic. Continued instability in key shipping routes, officials warned, could impact not only energy markets but also global food supply chains.
With the conflict entering its second month and no clear de-escalation in sight, investors are bracing for continued volatility across financial markets.