By Ronnie Harui
Oil surged while Asian equities slumped as the growing conflict in the Middle East intensified concerns over petroleum supply disruptions and rising inflation in Asia.
Traffic through the Strait of Hormuz has ground to a virtual halt, as global energy markets reel from their most severe crisis since the 1970s.
"A week-long halt in Hormuz shipping is driving a fast-escalating energy shock, lifting oil and gas prices, boosting the U.S. dollar and global yields, and challenging 2026 consensus trades as stagflation risks rise," OCBC Group Research strategists said in a note.
Front-month West Texas Intermediate crude oil futures jumped 24.5% to $113.20 a barrel and front-month Brent crude oil futures climbed 23.0% to $114.06 a barrel in early Asian trade on Monday.
On the equities front, Japan's Nikkei Stock Average tumbled 7.0%, South Korea's benchmark Kospi index dropped 7.5% and Singapore's FTSE Straits Times Index shed 2.5%.
U.S. stock futures also declined, with eMini Nasdaq 100 futures losing 2.3%, eMini S&P 500 futures shedding 2.0% and eMini Dow futures down 2.2%.
"Wall Street futures are under pressure after crude oil surged at the weekly open, as escalating Middle East tensions drive volatility across global markets," StoneX's Matt Simpson said in commentary. "With oil prices spiking and equities testing key support levels, traders are bracing for further risk-off moves," the senior market analyst added.
The greenback strengthened against most other currencies on Monday. The U.S. Dollar Index rose 0.6% to 99.552.
Dollar strength also reduced the appeal of dollar-denominated assets such as gold for holders of non-dollar currencies. Spot gold fell 1.5% to $5,092.58 a troy ounce and spot silver was 2.1% lower at $82.67 an ounce.
The "U.S. dollar [is] outshining bullion as the preferred safe haven amid the flight to safety sparked by the U.S.-Israeli strike on Iran," said Nikos Tzabouras, senior market analyst at Tradu.com.
If the Strait of Hormuz remains effectively closed for a prolonged period, Asian countries such as the Philippines could be "disproportionately hit," MUFG Bank's Michael Wan said in a research report.
"This time is different in this crisis--it is not just about higher oil prices but a potential looming energy shortage," the senior currency analyst said. The Japanese bank cited three major areas of energy supply shortage stress in this crisis: crude oil, petroleum products, and natural gas and natural gas liquids.
Asian currencies weakened sharply against the greenback. The dollar climbed 0.9% against the Philippine peso to 59.5450 pesos and rose 0.5% versus the Malaysian ringgit to 3.9665 ringgit, FactSet data showed.
Moreover, the rapid rise in oil prices has exacerbated fears of accelerating inflation that could lead to a faster pace of interest-rate increases by central banks across Asia, which have dragged prices of Asian government bonds lower.
Yields on Australia's 10-year sovereign securities climbed 14 basis points to 4.9780%, while those on New Zealand's 10-year government bonds jumped 20 basis points to 3.4380%. Ten-year Japanese government bond yields rose 6.5 basis points to 2.225%. Bond prices move inversely to yields.
Write to Ronnie Harui at ronnie.harui@wsj.com
(END) Dow Jones Newswires
03-08-26 2342ET
