Global financial markets turned cautious on Tuesday as escalating tensions between the United States and Iran in the Gulf waters drove oil prices higher and revived inflation concerns, with traditional equities sliding and crypto markets likely to feel the risk-off pressure. Hong Kong’s Hang Seng Index fell 1.3%, leading losses in Asia, while Europe’s STOXX 600 dipped 0.1% and London’s FTSE 100 lost 1%.
The renewed hostilities came after Donald Trump attempted to facilitate the passage of vessels through the Strait of Hormuz, a chokepoint for roughly 20% of global daily oil and gas demand. Brent crude futures hovered at $113.85 per barrel, while U.S. crude slipped to $105.03 but remained well above $100, feeding fears that higher energy costs will stoke inflation and force central banks to tighten policy more aggressively. In Europe, expectations are building for two to three ECB rate hikes this year.
Trade tensions added another layer of uncertainty. Trump announced plans to raise tariffs on European automakers to 25%, accusing the EU of non-compliance with a prior trade deal, which weighed on shares of Volkswagen, Mercedes-Benz, and BMW. Currency markets also saw volatility, with the yen briefly spiking to 157.22 per dollar amid speculation of possible intervention by Tokyo.
For crypto, the macro backdrop is decisively negative. Risk assets including Bitcoin and altcoins tend to suffer when inflation fears mount, central banks signal tighter money, and geopolitical turmoil saps investor appetite. A fragile session in equities, combined with a strong dollar and safe-haven flows, suggests crypto could see further downside unless a dovish pivot emerges.
