Japan and Korea stocks slide as middle east conflict worsens
Markets in the Asia-Pacific region fell sharply on Monday. Major indexes in Japan and South Korea dropped by more than 5% as investors moved away from risky assets. This happened because the conflict in the Middle East has continued and is now in its fourth week.
On Saturday, President Donald Trump said the U.S. would “destroy” Iran’s power plants if Iran did not fully reopen the Strait of Hormuz within 48 hours. This strait is very important for global energy supply.
Iran responded by warning that it would attack energy and water facilities in the Gulf if the U.S. carries out this threat.
Iran’s Parliament speaker, Mohammad Bagher Ghalibaf, said that any attack on Iran’s power plants would quickly lead to strikes on energy and oil infrastructure across the region. He added that these targets would be destroyed, and oil prices would rise for a long time.
On Sunday, Ghalibaf also warned financial institutions. He said that those buying U.S. government bonds and helping fund the U.S. military could also become targets, along with military bases.
Oil prices changed quickly on Monday. Brent crude rose slightly to $112.68 per barrel, while U.S. West Texas Intermediate increased to $99 per barrel.
Goldman Sachs raised its oil price forecasts. It now expects Brent crude to average $110 in March and April, and WTI to average $98 in March and $105 in April.
The bank said it expects oil shipments through the Strait of Hormuz to stay very low for about six weeks, followed by a slow recovery over one month. Prices may keep rising until investors feel sure that the disruption will not last long.
The price gap between Brent and WTI oil rose to more than $14 per barrel, the largest difference in years. This could mean the crisis has reached its most intense point, according to a market strategist at Strategas Research.
In stock markets, Japan’s Nikkei 225 fell nearly 5%, and the Topix dropped 4.4%. In South Korea, the Kospi fell more than 6%, and the Kosdaq dropped nearly 5%. Trading was briefly stopped after futures fell sharply.
Australia’s S&P/ASX 200 fell 2.4%, while Hong Kong’s Hang Seng Index and China’s CSI 300 both dropped by almost 2% at the start of trading.
