Oil prices rallied while Asian stock markets traded lower on Monday after the United States launched fresh airstrikes on Iran and Tehran responded with retaliatory attacks, reigniting concerns over global energy supplies and inflation.
Brent crude, the international benchmark, rose 3.9 per cent to $78.96 a barrel, while US West Texas Intermediate (WTI) crude gained 4 per cent to $74.26 per barrel.
The gains came after oil prices had recently retreated to pre-conflict levels following an interim agreement aimed at easing tensions and the resumption of shipping through the Strait of Hormuz.
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According to the Associated Press (AP), the latest escalation followed multiple waves of US strikes on Iran after an Iranian attack on a container vessel in the strategic waterway over the weekend. Iran later retaliated by targeting multiple locations across the Middle East.
How did Asian markets react?
Investor sentiment weakened across most Asian markets following the renewed geopolitical tensions.
Japan’s Nikkei 225 declined 1.1 per cent, while South Korea’s Kospi dropped 5.6 per cent.
Technology stocks also came under pressure. South Korean chipmaker SK Hynix fell 10.6 per cent in Seoul after its recent Wall Street debut, while Samsung Electronics lost 6.7 per cent.
Elsewhere, Hong Kong’s Hang Seng Index edged up 0.1 per cent, while China’s Shanghai Composite Index slipped 1.2 per cent. Australia’s S&P/ASX 200 also ended lower.
US stock futures were trading in negative territory, with futures linked to the S&P 500, Dow Jones Industrial Average and Nasdaq Composite all pointing to a weaker opening.
Why are investors worried?
The market is watching very closely if the renewed tensions between the two countries can cause any disruption in oil supply in the Strait of Hormuz, which is an important passage of crude oil from around the world.
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Rising oil prices can push inflation at a time when there are expectations regarding future trends in interest rates around the globe.
Investors’ focus will now shift to the start of the corporate earnings season in the US as big banks like JPMorgan Chase, Goldman Sachs, Bank of America, Citigroup, and Wells Fargo are set to release their quarterly earnings later this week.
FAQs
What caused the increase in oil prices today?
Today’s rise in oil prices was triggered by new airstrikes carried out by the US on Iran and the retaliation carried out by Iran.
How did Asian stock markets react?
Most Asian markets traded lower, with Japan’s Nikkei and South Korea’s Kospi posting sharp declines as investors reacted to heightened geopolitical tensions.
