Asian stock markets suffered steep losses on Thursday as a dramatic escalation in the US-Iran conflict and a sharp rise in oil prices sent shockwaves through global financial markets, driving investors toward defensive positions. The turmoil pushed Japan's Nikkei 225 Index to its lowest level since May 22, while South Korea's KOSPI and other regional benchmarks faced heavy selling pressure. Against this backdrop, the cryptocurrency market showed surprising resilience, with bitcoin and ether posting modest gains.
The Nikkei 225 slumped to ¥62,210, marking an 8.40% decline from its 2026 high, as Japan's heavy reliance on Middle Eastern oil imports intensified fears of rising inflation and potential interest rate hikes by the Bank of Japan. The yield on Japan's 10-year government bond surged to 2.68%, and the two-year yield climbed to 1.41%, signaling market expectations of BoJ tightening. In South Korea, the KOSPI tumbled 1.2%, having fallen as much as 4.4% earlier in the session, with the index now well off its year-to-date high of 8,935 KRW. Hong Kong's Hang Seng Index dropped over 1.45%, while Taiwan's benchmark slid 1.5%.
The fresh wave of risk aversion was triggered after the US military launched new strikes on multiple targets in Iran overnight, following President Donald Trump's warning of further attacks if no peace deal was reached. Iran responded by announcing the closure of the Strait of Hormuz, a critical chokepoint for global oil shipments. Brent crude prices soared 3% to $95.45 a barrel, having settled 1.8% higher on Wednesday, and West Texas Intermediate jumped to $91. Analysts warn that sustained high energy prices could complicate the inflation outlook for major economies already grappling with price pressures.
Compounding the gloomy sentiment, US consumer price data released overnight showed the fastest inflation acceleration since April 2023, renewing concerns that the Federal Reserve may raise interest rates further. Wall Street suffered heavy losses, with the S&P 500 dropping 1.6% and the Nasdaq Composite losing 2%. Fed funds futures now imply a 51.6% chance of a rate hike at the October meeting. The US 10-year Treasury yield rose to 4.5483%, and the dollar index held steady at 100.03, supported by safe-haven flows.
Technology stocks across Asia faced additional headwinds after Oracle fell 8.9% in extended trading on concerns over massive AI infrastructure spending. Strategists cautioned that stretched valuations in Korea, Taiwan, and the broader Asian tech sector make them vulnerable to further correction. Amid the equity rout, bitcoin gained 0.4% to $62,013.58 and ether rose 0.3% to $1,634.13, stabilizing after a broader selloff in speculative assets. The crypto market's relative calm offered a contrast to the carnage in traditional markets, though trading remained subdued.
