Asian markets turned risk-off on Thursday as renewed military escalation in the Middle East pushed oil higher and pressured equities across Asia, while investors also braced for key US inflation data, according to a report by Reuters.
Asian stock indices retreated after reports of fresh US military strikes on Iranian targets and claims of retaliatory actions from Tehran, reviving concerns that earlier hopes for de-escalation in the region may be premature.
Oil prices rallied sharply, with Brent crude climbing nearly 4% and US benchmark prices also advancing, as traders reassessed the risk of supply disruption through critical shipping routes such as the Strait of Hormuz.
The spike in energy prices added fresh inflation concerns for global markets, pushing US Treasury yields higher and weighing on risk assets, particularly in interest-rate-sensitive sectors such as technology.
Analysts warned that uncertainty around the duration and severity of the conflict could keep energy markets volatile, with insurance costs for shipping through key maritime corridors rising significantly.
Equity markets in Asia led the declines, with Japan’s Nikkei and South Korean benchmarks both falling sharply as investors reduced exposure to cyclical and growth-heavy sectors.
Broader regional indices across the Asia-Pacific also moved lower, reflecting a widespread shift toward risk aversion.
Futures markets pointed to a softer open in Europe and the United States, with major equity index futures drifting lower as geopolitical risks overshadowed earnings optimism.
At the same time, attention is turning to upcoming US personal consumption expenditure (PCE) inflation data, a key metric for Federal Reserve policy expectations.
Economists forecast that higher energy prices could push headline inflation to multi-year highs, reinforcing concerns that inflation remains persistently above central bank targets.
The potential inflationary impact of rising oil prices has led some market participants to reassess the outlook for interest rates, with debate intensifying over whether the Federal Reserve may need to maintain a restrictive policy stance for longer than previously expected.
Currency markets reflected the shift in sentiment, with the US dollar holding firm against major peers and the yen weakening toward levels that have previously prompted intervention by Japanese authorities.
In commodities, gold retreated despite ongoing geopolitical uncertainty, suggesting limited safe-haven flows compared with earlier episodes of market stress.
