Japan’s benchmark Nikkei 225 index plunged more than 5% and other Asian markets also tumbled Monday after oil prices soared to nearly $120 a barrel, casting a shadow over economies heavily dependent on imported crude and gas from the region.
The futures for the S&P 500, Nasdaq composite index and the Dow Jones Industrial Average were trading more than 1% lower after dropping more than 2% late Sunday.
A Chinese special envoy to the Middle East, Zhai Jun, called for an end to the attacks and said strikes on non-military targets and civilians should be condemned. Meanwhile, South Korean President Lee Jae Myung warned against hoarding, panic buying and collusion between refiners and gas stations.
“Please respond proactively to the growing volatility in the financial and foreign exchange markets, which are the lifeblood of our economy," Lee said.
Oil prices rocketed higher after both sides in the war struck new targets over the weekend, including civilian ones. Bahrain accused Iran of hitting one of the desalination plants that are crucial for drinking water in Gulf countries. Israel struck oil depots in Tehran, sending up thick smoke and causing environmental alerts.
The Nikkei regained some of its earlier losses to shed 5.2% to 52,728.72. South Korea's Kospi sank 6% to 5,251.87.
Chinese markets, which tend to be less affected by global trends, saw more moderate losses. Hong Kong's Hang Seng fell 1.6% to 25,343.77 the Shanghai Composite index was down 0.7% at 4,097.69.
Taiwan's benchmark dived 4.4% and other regional markets also swooned.
As of 0600 GMT, the price for a barrel of Brent crude was $103.54 a barrel. US benchmark crude rose to $107.35. Both were about 15% above their closing prices Friday.
Crude prices have spiked to their highest levels in at least 14 years as the war, now in its second week, ensnares countries and places that are critical to the production and movement of oil and gas from the Gulf. They last rose above $100 shortly after Russia invaded Ukraine in 2022.
“The market woke up to the sound every macro trader dreads. The oil alarm bell. And this time it was not a polite chime. It was a fire siren,” Stephen Innes of SPI Asset Management said in a commentary.
Surging oil and gas prices, if they persist, could ripple across the globe, further complicating matters for countries still adjusting to higher tariffs on exports to the United States under President Donald Trump.
Senior officials of Southeast Asian countries were meeting this week in Manila, the Philippines, where they were expected to discuss ways to counter the shock from higher energy costs.
“Oil prices will reach a peak at some point –- maybe they already have, maybe there’s more to come -– but they are likely to fluctuate at elevated levels for weeks, perhaps months,” Ipek Ozkardeskaya of Swissquote said in a commentary.
“Eventually -– even if the war persists –- energy prices will likely come down. But during this period, high energy prices will revive inflation globally and weigh notably on growth.”
On Friday, the S&P 500 dropped 1.3% after a report showed US employers cut more jobs last month than they created and after oil prices shot above $90 per barrel. The combination of a weak economy and high inflation is a worst-case scenario for investors because the Federal Reserve has no good tool to fix both problems at the same time.
The Dow plunged as many as 945 points before finishing with a loss of 453, or 0.9%, and the Nasdaq composite sank 1.6%.
Early Monday, the US dollar, which retains its status as a safe haven for investors bracing against uncertainty, gained against other major currencies. It was trading at 158.46 Japanese yen, up from 158.09 yen late Friday. The euro rose to $1.1558, up from $1.1556.
