By Ronnie Harui and Sherry Qin
A wave of risk-off sentiment swept Asia markets on Monday, spurring slumps across asset classes as investors fear that a drawn-out conflict in the Middle East will hurt the global economy.
Oil prices jumped, while equities and government bonds fell across the board as continued hostilities stoked fears of an energy-driven inflation shock that could force central banks to raise interest rates.
Markets increasingly worry that a lasting energy supply disruption will spill over into other commodities, affecting industries from agriculture to aviation as the U.S.-Israel war with Iran stretches into its fourth week.
According to International Energy Agency Executive Director Fatih Birol, at least 40 energy assets across nine countries have been severely damaged since the conflict began.
Front-month West Texas Intermediate crude oil futures briefly surpassed the $100 a barrel mark, while front-month Brent was last 0.4% higher at $112.65 a barrel.
Over the weekend, President Trump threatened to attack Iranian power plants if the Strait of Hormuz isn't opened within 48 hours, prompting Tehran to warn that it will respond in kind.
Sentiment was decidedly downbeat as the trading week got underway in Asia, which is particularly vulnerable to energy market turmoil as it imports the bulk of its power needs.
Japan's Nikkei Stock Average slumped 3.5% and South Korea's Kospi ended 6.6% lower. Hong Kong's Hang Seng Index shed 3.9% and China's Shanghai Composite Index was down nearly 4%. India's Sensex was 2.5% lower.
Australia's S&P/ASX 200 Index ended 0.7% lower, with the heavyweight materials sector again leading losses amid widespread weakness, including in gold, iron-ore and lithium stocks.
U.S. stock futures fell. Contracts tied to the Dow Jones Industrial Average were last down 0.6%, while S&P 500 and Nasdaq futures fell 0.8% and 1.0%, respectively.
StoneX's Matt Simpson said Trump's 48-hour ultimatum sets up a volatile start to the week, likely spilling into Tuesday if the deadline passes without resolution.
"Conceding quickly risks signaling weakness, particularly for a new leadership facing internal and external pressure," the senior market analyst said in a commentary. "That raises the risk of a prolonged standoff, which in turn keeps upside risks for oil prices and safe-haven flows firmly in play."
Yields on Asian government bonds climbed amid worries that central banks worldwide could tighten policy to keep inflation in check.
Asian policymakers have been taking steps to blunt the impact of the rise in fuel prices. However, if the conflict drags on, that will erode the policy buffers they have, Morgan Stanley analysts said.
"The market is becoming increasingly worried [the Middle East] conflict could become a protracted affair, broader in nature and structurally inflationary," National Australia Bank's Rodrigo Catril said in a commentary.
Global bonds have sold off aggressively, Catril said. Markets' "hawkish repricing" of central banks' rate paths has continued, with participants now seeing the possibility of an interest-rate increase by the Federal Reserve this year, according to the senior foreign-exchange strategist.
U.S. Treasury yields rose across the board in Asian trade, with the 10-year yield hitting 4.423%, the highest level since July 2025, before pulling back slightly, according to Tradeweb data.
Yields on Australia's 10-year sovereign debt rose 7 basis points to 5.1000% during the session, while those on New Zealand's 10-year government bond climbed 12 basis points to 4.8770%. Japan's 10-year government bond yields increased 4 basis points to 2.300%. Bond yields move inversely to prices.
Gold continued to weaken after spot prices recorded their largest one-week drop since 1983 last week. Spot gold was recently 4.7% lower at $4,280.24 a troy ounce, its lowest level so far this year. Spot silver shed 6.5% to $63.36 a troy ounce.
"Rising inflation expectations have pushed yields higher, reducing the appeal of non-yielding assets," including gold, Saxo Bank's Ole Hansen said in an email. "A stronger dollar and fading rate-cut expectations have added further pressure."
--Kimberley Kao, Emese Bartha contributed to this report
Write to Ronnie Harui at ronnie.harui@wsj.com and Sherry Qin at sherry.qin@wsj.com
(END) Dow Jones Newswires
March 23, 2026 03:02 ET (07:02 GMT)
Copyright (c) 2026 Dow Jones & Company, Inc.
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