The US-Iran conflict triggers risk aversion, Asian stock markets plummet on Monday

Investing.com - After weekend attacks by the U.S. and Israel on Iran, Asian stock markets plummeted on Monday, pushing oil prices higher and triggering broader risk aversion as funds flowed from risk assets to safe-haven assets.

Asian markets continued the weakness seen on Wall Street on Friday, with uncertainty around artificial intelligence and interest rates weighing down U.S. stocks. ESH26 fell 0.6% at 20:58 Eastern Time (01:58 Beijing Time), narrowing some of the earlier losses.

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U.S.-Iran Conflict Intensifies Risk Aversion, Asian Stocks Decline Across the Board

Hong Kong Hang Seng Index and Japan Nikkei 225 Index were the worst performers in Asia, falling 2.4% and 1.6%, respectively. These markets were also dragged down by declines in tech stocks.

Japan’s Topix Index dropped 1.6%, while China’s CSI 300 and Shanghai Composite Index declined 0.6% and 0.5%, respectively.

Australia’s ASX 200 fell 0.5%, Singapore’s Straits Times Index declined 1.8%, and India’s Nifty 50 futures dropped 0.8%.

Over the weekend, the U.S. and Israel launched attacks on Iran, resulting in hundreds of deaths, including Supreme Leader Ayatollah Khamenei and several other senior officials. The markets subsequently declined across the board.

Iran responded with retaliatory strikes on multiple Middle Eastern countries and U.S. bases in the region.

There are no signs of the conflict stopping, with U.S. and Israeli leaders stating they will continue attacking Iran. Tehran also vowed fierce retaliation, and market focus remains on the country’s leadership changes.

The weekend attacks caused oil prices to surge sharply on Monday amid fears of supply disruptions in the Middle East. Rising crude prices also signal inflation pressures for several Asian countries heavily dependent on imports of the commodity.

Tech Stocks Drag Markets Down, China’s Economic Policies Under Scrutiny

Beyond geopolitical tensions, Asian markets were also pressured by declines in tech stocks, as investors remain uncertain about AI’s impact on the sector.

Software stocks suffered significant losses in February amid fears of increased competition from AI tools.

In China, attention is focused on the upcoming “Two Sessions,” where the country’s top political bodies will meet from March 4 to March 11. These meetings will set the agenda for China’s 14th Five-Year Plan.

Many expect Beijing to introduce more stimulus measures, especially given the ongoing slowdown in China’s economic growth in the 2020s.

U.S. producer inflation data released on Friday exceeded expectations, raising concerns about persistent inflation in the world’s largest economy, which could keep interest rates elevated for longer.

Regional interest rate uncertainties also exert pressure, with markets reducing expectations of further rate hikes by the Bank of Japan, especially after soft inflation data.

However, markets increasingly believe the Reserve Bank of Australia will raise interest rates further in the coming months, as the country faces a resurgence of inflation toward the end of 2025.

This article was translated with the assistance of artificial intelligence. For more information, please see our Terms of Use.