Asian stock markets fell sharply on Monday as tensions between Washington and Tehran intensified, with fears mounting over a potential escalation in the ongoing conflict involving the United States, Israel and Iran.
Japan’s benchmark Nikkei 225 dropped nearly 3.5%, while South Korea’s Kospi plunged by 6.5%, reflecting investor anxiety over geopolitical risks and energy supply disruptions.
The latest developments come as US President Donald Trump warned on Saturday that he would “obliterate” Iranian power plants if Tehran failed to reopen the crucial Strait of Hormuz shipping route. Iran responded by warning it would target key infrastructure across the region if such action were taken.
Japan and South Korea have been among the hardest hit by the disruption, given their reliance on oil and gas shipments that typically pass through the strait. Since the US and Israel launched strikes on Iran on 28 February, the waterway — one of the busiest oil transit routes globally — has effectively been blocked.
Roughly 20% of the world’s oil and liquefied natural gas supply normally flows through the Strait of Hormuz, and the conflict has already driven global fuel prices significantly higher.
Global Energy Crisis Fears Grow As Strait Of Hormuz Remains Blocked
The head of the International Energy Agency, Fatih Birol, warned that the current situation could trigger the most severe energy crisis in decades.
Speaking at the National Press Club in Canberra, he likened the unfolding situation to the oil shocks of the 1970s and the global fallout following Russia’s invasion of Ukraine in 2022.
“This crisis as things stand is now two oil crises and one gas crash put all together,” he said.
In a social media message posted on Saturday, Trump said: “If Iran doesn’t FULLY OPEN, WITHOUT THREAT, the Strait of Hormuz, within 48 HOURS from this exact point in time, the United States of America will hit and obliterate their various POWER PLANTS, STARTING WITH THE BIGGEST ONE FIRST!”
The warning followed Iranian missile strikes on the Israeli city of Dimona, and shortly before a second attack targeting the nearby town of Arad.
Oil Prices Surge And Global Markets Brace For Further Escalation
Iranian parliament speaker Mohammad Bagher Ghalibaf said on Sunday that regional energy and desalination facilities would be “irreversibly destroyed” if Iranian power plants were targeted.
Such developments could further intensify a conflict that has already disrupted energy flows, increased prices and led to shortages in some areas.
Energy consultancy Wood Mackenzie’s chairman and chief analyst Simon Flowers said markets were watching closely to see whether the threats would materialise.
“If the US does strike Iranian infrastructure, it escalates the whole intensity of the war a step further and then we’d have to see if Iran strikes back at infrastructure tit-for-tat as they’ve done over the last week or so,” he told the BBC’s Today programme.
Oil prices continued to climb on Monday, with Brent crude rising by more than 1% to above $113.40 (£85.30) per barrel, while US-traded crude increased by over 2% to $100.50.
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The sustained rise in energy costs has raised concerns about a potential spike in household energy bills in the UK later this year.
Prime Minister Sir Keir Starmer held talks with Trump on Sunday, with both leaders discussing the importance of reopening the Strait of Hormuz.
He is expected to chair a meeting of the government’s emergency Cobra committee later on Monday, joined by Bank of England governor Andrew Bailey.
The meeting will focus on safeguarding energy supplies, strengthening supply chain resilience, and assessing the broader impact of the conflict on the cost of living.
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