Asian stocks tumble further, oil extends gains as inflation fears grow

2026-03-04 - 03:14

The South Korean Kospi shed over 8%, triggering a brief trading halt, a day after dropping more than 7%. (EPA Images pic) HONG KONG: Asian equity markets plunged again Wednesday while oil extended gains as the United States and Israel pressed on with their war on Iran, with investors growing fearful about a surge in inflation and the impact on the global economy. As the joint strikes on the Islamic republic moved into a fifth day, observers warned that the continued choking of crude supplies from the Middle East would continue to push prices higher and deal a blow to hopes for any more monetary easing. US President Donald Trump pledged that if needed, the navy would escort oil tankers through the Strait of Hormuz – through which about a fifth of global oil supplies flow – and ordered Washington to provide insurance for shipping. That provided some relief to traders and pared a rally in prices Tuesday. However, Iranian strikes on several neighbours threatened to broaden the conflict, while uncertainty about how long the war would go on and news that some oil fields in the region had been closed continued to put upward pressure on the commodity. Both main oil contracts rose around one percent Wednesday. West Texas Intermediate has soared 12% to more than US$75 since last Friday, before the attacks began, while Brent is up more than 13% to sit above US$82. With some warning that they could top US$100 a barrel, equity markets are taking a pounding. “Asian equities are now staring at a third consecutive day of losses and the reason is not mysterious,” wrote Stephen Innes at SPI Asset Management. “When crude edges higher, the invoice lands hardest in Asia, where imported energy is not just a line item but a structural dependency. “Export-driven economies suddenly find themselves recalculating margins with a more expensive barrel sitting quietly in the background of every factory floor and shipping lane.” Tokyo and Seoul were at the forefront of the selling, having blasted to multiple record highs since the start of the year on the back of the AI tech boom. The South Korean Kospi shed more than eight percent, sparking a brief trading suspension, a day after it dived more than seven percent Tuesday after a long weekend. Japan’s Nikkei 225 was off more than three percent. And tech firms were sustaining heavy losses. Chipmakers Advantest and Tokyo Electron sank more than four percent in Japan, while Seoul-listed Samsung and SK hynix shed 7.3% and 5.6% respectively. The selling followed big losses in Europe, where London fell 2.8% but both Frankfurt and Paris dropped by more than three percent – hit by a spike in natural gas prices to their highest levels since Russia’s invasion of Ukraine. The prospect of energy costs spiking has hammered hopes for any more central bank interest rate cuts as officials were already concerned about still-elevated inflation. Analysts said the Federal Reserve, European Central Bank and Asian central banks would likely delay interest rate cuts but the Bank of England as well those in parts of Latin America and Central Europe could be forced to hike.