The ongoing conflict in the Middle East, triggered by U.S. and Israel's attack on Iran, has significantly impacted global energy markets and investor sentiment across Asia-Pacific. Shipping traffic through the Strait of Hormuz, which previously accounted for a fifth of global seaborne oil transit, has virtually halted since the strikes began on February 28, 2026, causing reduced energy supplies and affecting prices and company operations throughout Asia [1][2]. Crude oil prices have surged, with West Texas Intermediate (WTI) crude rising more than 3% to settle just below $103 a barrel on Monday, marking its first breach of the $100 level since 2022. Brent crude futures for May closed at $112.78 per barrel, while WTI was last up 2.8% at $105.80 [2].
Asia-Pacific equity markets responded negatively to the heightened geopolitical risk and rising energy costs. On Tuesday, Australia's S&P/ASX 200 fell 0.12%, Japan's Nikkei 225 dropped 0.84%, Topix declined 0.57%, South Korea's Kospi plunged 2.4%, and Kosdaq slipped 0.77%. Hong Kong Hang Seng index futures were at 24,683, down from the previous close of 24,750.8 [2]. The U.S. market also saw declines, with the S&P 500 falling 0.39% to 6,343.72, the Nasdaq Composite dropping 0.73% to 20,794.64, while the Dow Jones Industrial Average rose 0.11% to 45,216 [2]. U.S. stock futures were little changed, with S&P 500 futures slipping less than 0.1%, Nasdaq 100 futures shedding 0.1%, and Dow futures gaining 23 points [2].
French President Emmanuel Macron is visiting East Asia, meeting with leaders in Japan and South Korea to discuss cooperation on next-generation nuclear reactors, as Tokyo seeks to reduce its dependency on imported fossil fuels amid the energy crisis. The trip aims to strengthen France's relationship with Indo-Pacific allies and operate more independently of China and the U.S. [1]. Additional data on the business and economic impact of the war is expected this week, including the Bank of Japan's tankan business confidence survey and inflation data for countries such as Indonesia. Market watchers forecast that Japanese business sentiment may improve, but forward outlooks remain clouded due to the conflict in the Middle East [1].
President Donald Trump escalated threats on Monday, stating that the U.S. would destroy Iran's electricity-generating plants, oil wells, and Kharg Island if the Strait of Hormuz remains closed and no peace deal is reached. The Trump administration is considering sending ground forces to seize Kharg Island, which facilitates 90% of Iran's crude exports [2]. Despite rising energy prices, Federal Reserve Chair Jerome Powell stated that the inflation outlook remains in check and the central bank does not need to respond with higher interest rates [2].
CONCLUSION
The Iran conflict has sharply disrupted oil supply routes and driven up energy prices, leading to broad declines in Asia-Pacific and U.S. equity markets. Ongoing geopolitical tensions and threats of further escalation continue to unsettle investors, while upcoming economic data and diplomatic efforts in East Asia may provide further insight into the crisis's impact. Market sentiment remains negative, with high volatility expected as the situation evolves.