Global financial markets experienced severe turbulence at the start of trading on Monday. The intensification of military conflict between Iran and Israel has sharply heightened market concerns over escalating geopolitical tensions in the Middle East, triggering a surge in international crude oil prices of nearly 5% and a broad sell-off across major Asian stock markets.
The sudden deterioration in the Middle East situation served as the immediate catalyst for the market upheaval. Following reports of Israeli strikes on Hezbollah targets in the suburbs of Beirut, Lebanon, Iran launched a barrage of ballistic missiles at Israel in retaliation, with Israel subsequently responding. This marks the first direct military confrontation between the two sides since a ceasefire agreement was reached two months ago, abruptly ending the fragile peace in the region.
This development has sent shockwaves through global energy markets. The benchmark Brent crude oil futures price soared nearly 5%, nearing $98 per barrel. Similarly, U.S. West Texas Intermediate (WTI) crude futures surged approximately 5%, reaching around $95 per barrel. Market analysts note that investors are currently highly focused on the potential risk of supply disruptions through the Strait of Hormuz, a critical global energy shipping lane. This strait handles about one-fifth of the world's oil and natural gas shipments, and the risk of blockade due to geopolitical conflict is persistently driving up energy risk premiums. Prior to this, due to the prolonged conflict, U.S. retail gasoline and diesel prices have already increased by 40% and 42%, respectively, compared to pre-war levels.
Panic selling erupted in capital markets, with Asian stock markets heavily reliant on energy imports bearing the brunt of the impact. After Monday's opening, spillover effects from the commodity supply chain quickly spread to technology and semiconductor sectors. Stocks related to the artificial intelligence theme, which had led gains for several months, faced collective profit-taking, dragging down regional indices across the board. Japan's Nikkei 225 index opened lower and continued its decline, with losses at one point exceeding 4%.
South Korea's stock market, which has been one of the world's best-performing major markets this year, suffered a severe blow. The Korea Composite Stock Price Index (KOSPI) plunged as much as 8% at the open, triggering an emergency circuit breaker mechanism. Although losses narrowed somewhat after the midday session, the index still maintained a decline of nearly 7% during the afternoon trading session. Additionally, U.S. stock index futures were also trading lower pre-market, with S&P 500 futures showing significant declines, indicating that U.S. markets would face downward pressure at Monday's open.
Market analysis institutions point out that while the U.S. and Iran are currently engaged in tentative contacts regarding a peace agreement, this direct military confrontation has cast renewed uncertainty over the prospects for political mediation. Given that global inflationary pressures are intensifying again due to surging energy prices, major central banks like those in the U.S. and Europe will face a more severe policy dilemma when assessing the persistence of external shocks. Global capital markets are likely to remain in a state of high volatility, dominated by risk-off sentiment, in the near term.
Comments