Asian Stocks Decline as Gulf Tensions Spur Over 3% Surge in Oil Prices

Asian stock markets slipped on Monday as escalating conflict in the Gulf sent oil prices surging, fueling investor concerns about renewed inflationary pressures and the potential for tighter monetary policy. The geopolitical flare-up comes as traders await key U.S. inflation data and the start of the corporate earnings season.

Oil and Bonds React to Geopolitical Risk

Crude oil prices jumped after Iran claimed to have closed the vital Strait of Hormuz shipping lane. According to a Reuters report, the developments sent prices sharply higher in early trade:

• Brent crude climbed 3.3% to $78.50 a barrel.
• U.S. crude added 3.4% to $73.83 a barrel.

The prospect of higher energy costs rekindled inflation fears, pushing government bond yields higher. The yield on the benchmark 10-year U.S. Treasury note rose 2 basis points to 4.59%, reflecting expectations that the Federal Reserve may need to maintain a hawkish stance.

Equities Under Pressure

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Regional equity indices broadly declined amid the risk-off sentiment. U.S. stock futures also pointed to a lower open, with S&P 500 futures down 0.3% and Nasdaq futures falling 0.5%.

In Asia, Japan’s Nikkei fell 1.0%, while MSCI’s broadest index of Asia-Pacific shares outside Japan eased 0.2%. South Korea's market, seen by some as a bellwether for the global semiconductor industry, fell 0.4% after shedding nearly 8% last week.

Currency and Commodity Moves

The U.S. dollar strengthened on the back of higher Treasury yields, with the dollar index firm at 101.12. The euro eased to $1.1403, partly due to Europe's greater reliance on foreign oil imports. Meanwhile, the higher yields weighed on non-interest-bearing assets, with spot gold slipping 1.1% to $4,076 an ounce.