Equity markets across Asia declined on Thursday, tracking losses on Wall Street after a sharp rise in oil prices above $112 per barrel and renewed concerns over inflation and interest rates dampened investor sentiment.
In early trading Tokyo’s Nikkei 225 dropped 2.5% to 53,875.94, while South Korea’s Kospi fell 1.3% to 5,845.62.
Hong Kong’s Hang Seng edged down 0.2% to 25,725.77 and China’s Shanghai Composite slipped 0.9% to 4,027.73. Australia’s S&P/ASX 200 and Taiwan’s Taiex also recorded losses, with the latter declining 1.2%.
The sell-off followed a weak session in the US, where the S&P 500 fell 1.4%, turning negative for the week.
The Dow Jones Industrial Average dropped 768 points, or 1. 6%, while the Nasdaq Composite lost 1. 5%, according to AP.
Investor sentiment has been hit by soaring crude prices as tensions in the Middle East show no signs of abating. Brent crude, the global benchmark, traded at $111.24 per barrel, up 3.6% from the previous day, while US benchmark crude gained 0.8% to $96.80 per barrel.
Oil prices have risen sharply amidst disruptions to energy infrastructure and supply chain in the Persian Gulf.
After strikes on Iran’s largest gas field South Pars, Tehran warned of stern retaliation against energy infrastructure across the region. Going as far as naming the facilities IRGC said it would be targeting as a response to attacks on facilities critical to Iran, according to Iranian state media.
Iran said it would target oil and gas facilities in Qatar, Saudi Arabia and the United Arab Emirates following an attack on infrastructure linked to its South Pars gas field.
The spike in energy prices has added to inflation concerns. A report released on Wednesday showed US wholesale inflation unexpectedly accelerated to 3.4% last month, indicating price pressures were already building before the conflict escalated.
Markets have been further pressured after the US Federal Reserve kept its key interest rate unchanged, signalling caution on future policy easing. Remarks from Fed Chair Jerome Powell also dampened expectations of rate cuts.
“We just don’t know,” Powell said about the trajectory of oil prices and how long President Donald Trump’s tariffs would take to fully impact the economy.
Analysts warn that prolonged disruptions in oil and gas supplies could intensify inflationary pressures globally, complicating the outlook for interest rates and economic growth.
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