Middle East Conflict Triggers Asia Market Sell-Off & Oil Price Volatility

Asian markets experienced a sharp sell-off Monday, with major indexes in Japan and South Korea falling more than 5%, as investors reacted to escalating conflict in the Middle East entering its fourth week. The declines followed a weekend statement by U.S. President Donald Trump, who said he would “obliterate” Iran’s power plants if Tehran did not fully reopen the Strait of Hormuz within 48 hours.

Iran responded with a threat to target energy infrastructure and desalination facilities in the Gulf region should the U.S. Carry out its ultimatum. Mohammad Bagher Ghalibaf, Iran’s Parliament speaker, stated Saturday that attacks on Iranian power plants would “immediately” be met with retaliatory strikes on energy and oil infrastructure across the region, potentially causing a sustained rise in oil prices. “Critical infrastructure and energy and oil infrastructure throughout the region will be considered legitimate targets and irreversibly destroyed, and oil prices will rise for a long time,” Ghalibaf said on X, formerly known as Twitter.

Ghalibaf further extended the threat to include holders of U.S. Treasurys, warning that financial entities purchasing American government bonds and “finance[ing] the U.S. Military budget” would be considered legitimate targets alongside military bases.

Crude oil prices were relatively stable in early trading Monday. Brent crude lost 0.25% to $111.97 per barrel as of 7:16 p.m. EST, while U.S. West Texas Intermediate was down 0.6% at $97.64 per barrel. The spread between Brent and WTI exceeded $14 a barrel, the largest gap between the benchmarks in years, potentially indicating the peak intensity of the oil crisis, according to Chris Verrone, chief market strategist at Strategas Research, speaking on CNBC’s “Squawk Box Asia.” Elevated Brent crude prices may prompt traders to anticipate a prolonged conflict.

The Nikkei 225 in Japan declined nearly 5%, expanding earlier losses, while the Topix dropped 4.4%. South Korea’s Kospi plunged more than 6%, prompting a brief suspension of trading after the Kospi 200 futures index fell by over 5%. Australia’s S&P/ASX 200 declined 2.4%. Hong Kong’s Hang Seng Index and the mainland CSI 300 both dropped nearly 2% on the open.

Overnight in the U.S., stock futures were little changed. The Dow Jones Industrial Average was flat, the S&P 500 shed 0.1%, and Nasdaq Composite futures pulled back by 0.2%. The three major indices ended last week lower, with the S&P 500 declining by more than 1.5% and falling below its 200-day moving average for the first time since May. The Dow, experiencing its first four-week losing streak since 2023, and the Nasdaq each fell around 2% for the week.

The joint U.S.-Israel strikes against Iran, launched on February 28, 2026, targeted military, intelligence, and government facilities across Tehran and other major Iranian cities, according to reports. Iranian authorities reported at least 200 people killed and hundreds wounded, with strikes hitting locations in roughly two-thirds of the country’s provinces. A strike on an all-girls school in Minab reportedly killed at least 85 pupils and injured dozens more.

Commentators have noted the timing of the strikes, falling on the 11th day of the ninth month of the Islamic calendar, prompting discussion about whether the U.S. Intentionally struck Iran on a date considered significant within Islam. Ilhan Omar, a U.S. Representative, condemned the attack as occurring during Ramadan, a claim that received criticism and a context note on X.

As of Monday, President Trump has indicated he is considering “winding down” the Middle East military operation, though this statement appeared to contradict his administration’s simultaneous move to deploy additional troops and warships to the region.