Asian shares traded mixed on Tuesday following a sharp rise in oil prices, with Brent crude climbing nearly 4% early in the day to $104.21 a barrel and U.S. benchmark crude rising to $97.61 per barrel after dipping to about $93 on Monday [1]. The spike in oil prices has been attributed to Iran nearly halting traffic through the Strait of Hormuz, a critical passage for global oil shipments, in response to attacks by the United States and Israel. This disruption has led oil producers to cut production due to limited export routes [1].
Market reactions were varied across Asia: Tokyo's Nikkei 225 slipped 0.09% to close at 53,700.39, South Korea's Kospi jumped 1.6% to 5,639.77, Hong Kong's Hang Seng added 0.2% to 25,892.88, and the Shanghai Composite dropped 0.6% to 4,058.31. Australia's S&P/ASX 200 gained 0.4% to 8,614.30 after the Reserve Bank of Australia raised its benchmark interest rate to 4.1%, citing higher fuel prices and surging inflation. This was Australia's first rate hike since November 2023 [1]. Taiwan's Taiex rose 1.5%, while India's Sensex shed 0.1% [1].
U.S. futures fell back, with contracts for the S&P 500 and Dow Jones Industrial Average down 0.5%. On Monday, the S&P 500 had climbed 1% to 6,698.38, marking its biggest gain in five weeks, while the Dow Jones Industrial Average added 0.8% to 46,946.41 and the Nasdaq composite jumped 1.2% to 22,374.18 [1].
Analyst Stephen Innes of SPI Asset Management commented that "the panic is still there, just dialled down a notch as crude slipped off the boil. Brent easing back toward $100 flipped the tape from bunker mentality to opportunistic risk-taking in a heartbeat" [1]. President Donald Trump called for other countries affected by the Strait of Hormuz closure to "take care of that passage" and pledged U.S. support [1]. Ongoing uncertainty regarding the scope and duration of the conflict has continued to roil financial markets since the war began just over two weeks ago [1].
CONCLUSION
The closure of the Strait of Hormuz and subsequent spike in oil prices have significantly impacted global financial markets, prompting mixed reactions across Asian indices and a rate hike in Australia. Continued uncertainty surrounding the conflict and oil supply disruptions are likely to keep markets volatile in the near term.