Asian markets fall as US-Iran tensions push oil prices higher
Asian stock markets fell on Monday as renewed fighting between the United States and Iran pushed oil prices higher and increased concerns about inflation and interest rates.
Japan’s Nikkei dropped 1.6%, while South Korean shares fell 2.2%, as investors reacted to the latest escalation in the Middle East and the prospect of higher US interest rates.
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Oil prices climbed after US forces struck Iranian launchers on Larak Island in the Strait of Hormuz on Sunday, followed by Iranian attacks targeting US forces in Jordan.
Brent crude rose to around $90 a barrel, adding to concerns that disruption to global energy supplies could keep inflation elevated.
Interest rate expectations rise
Bond yields also remained high after US Federal Reserve Chair Kevin Warsh indicated on Friday that more work was needed to bring inflation under control.
Markets have increased expectations of a possible US interest rate rise in September, with the probability of a hike estimated at around 57%.
Investors will therefore be paying close attention to Friday’s US employment report.
Economists expect the economy to have added around 58,000 jobs in August, following a fall of 23,000 in July.
Losses across global markets
Elsewhere in Asia, the broader MSCI Asia-Pacific index outside Japan fell 1.2%, while Chinese blue-chip shares were down 0.7%.
European markets were also expected to open lower, with Euro Stoxx 50 and DAX futures falling, while futures for the S&P 500 and Nasdaq were also in negative territory.
Attention will now turn to the G20 meeting of finance ministers and central bankers in North Carolina on Monday and Tuesday, as well as upcoming US economic data, for further indications of the direction of interest rates.