Asian share markets moved lower on Monday as renewed fighting in the Gulf pushed oil prices sharply higher and revived concerns about global inflation.
Investors reacted cautiously after Iran said it had closed the Strait of Hormuz, while the United States said commercial traffic was still moving through the vital waterway.
News reported that global stocks fell and bond yields rose as investors assessed renewed U.S.-Iran military exchanges and pressure on AI-linked shares.
Oil Prices Jump on Strait of Hormuz Tensions
Oil prices rose strongly in early trade as traders priced in the risk of disrupted energy flows through the Strait of Hormuz.
Brent crude climbed about 3.8 per cent to $78.86 a barrel, rising from a recent low of $70.14. U.S. crude gained about 4.1 per cent to $74.36 a barrel.
The increase in oil prices renewed concerns that higher energy costs could feed back into inflation around the world.
Strait Traffic Drops to Five-Week Low
Shipping activity through the Strait of Hormuz slowed sharply.
Kpler ship-tracking data showed only six vessels passed through the strait on Sunday, the lowest number in five weeks. Reuters also reported that no visible liquefied natural gas tankers entered the strait over the weekend.
U.S. officials said about 20 vessels had been escorted through the passage in the previous 24 hours, although ship-tracking sites showed limited traffic moving.
Trump Says Strait Remains Open
U.S. President Donald Trump said Sunday that the Strait of Hormuz remained open to commercial shipping.
Iran, however, said earlier that it had closed the waterway after a vessel allegedly travelled on an unapproved route and was struck. Reuters also reported that Iran’s Revolutionary Guards said their navy stopped two ships in the strait by shutting down their systems, though the ships were not named.
U.S. and Iran Exchange Fresh Strikes
The latest market pressure followed another round of U.S.-Iran escalation.
Over the weekend, Tehran expanded attacks on Qatar and the United Arab Emirates, while the United States launched additional strikes on Iranian targets.
Reuters reported that U.S. forces completed another wave of strikes on Sunday, hitting dozens of Iranian targets at multiple locations with precision munitions.
Peace Deal Faces New Doubts
The renewed fighting has cast uncertainty over an interim U.S.-Iran agreement reached last month.
That agreement was intended to help reopen the Strait of Hormuz and move both sides toward a broader war-ending settlement after another 60 days of negotiations.
However, the latest exchange of attacks and conflicting claims over the status of the strait have raised doubts about whether the agreement can survive.
Oil Supply Still Below Pre-War Levels
After the interim agreement, global oil supply improved in June.
The International Energy Agency said supply rose by 4.1 million barrels per day in June, but remained 9.4 million barrels per day below pre-war levels, according to the market report cited in the original article.
With oil prices climbing again, investors are watching whether higher crude costs will reverse any recent easing in inflation.
Asian Stocks Under Pressure
Asian equity markets weakened as the oil shock and geopolitical concerns weighed on sentiment.
Japan’s Nikkei fell, while MSCI’s broadest index of Asia-Pacific shares outside Japan also declined. Reuters reported that Japan’s Nikkei dropped 1.9 per cent, while S&P 500 and Nasdaq futures also moved lower.
South Korea’s Chip Sector Remains in Focus
South Korea’s once-hot market came under renewed pressure after already suffering steep losses the previous week.
Reuters reported that the KOSPI fell 7.6 per cent on Monday after losing nearly 8 per cent last week, as leveraged bets on semiconductor shares came under strain. The index has become an important signal for global chip-sector sentiment, meaning further weakness could spread across technology markets.
SK Hynix Debut Followed by Volatility
South Korean chipmaker SK Hynix had seen its U.S.-listed shares jump nearly 14 per cent in its Nasdaq debut on Friday.
However, broader concerns over semiconductor valuations and AI-related momentum kept investors cautious.
Reuters also reported that Taiwan Semiconductor Manufacturing Co. is due to report results this week, with expectations for another record profit.
Gold Falls as Bond Yields Rise
In commodity markets, gold moved lower as rising bond yields reduced the appeal of non-interest-bearing assets.
Reuters reported that gold slipped about 1.5 per cent to around $4,060 an ounce.
The move reflected growing expectations that central banks, especially the Federal Reserve, may need to keep policy tighter if higher oil prices push inflation up again.
Dollar Strengthens With Yields
The U.S. dollar held firm as bond yields rose.
Reuters reported that the dollar index was near 101.13, while the euro traded around $1.1394 and the dollar rose against the yen to about 162.12.
The euro remained under pressure because Europe relies more heavily on imported energy than the United States.
Fed Rate Hike Bets Increase
Investors increased the probability of more Federal Reserve tightening.
Reuters reported that Fed fund futures implied around 39 basis points of policy tightening by the end of the year. The rise in oil prices has made Tuesday’s U.S. inflation data more important for markets.
Inflation Data and Warsh Testimony in Focus
Markets are now focused on the upcoming June Consumer Price Index report.
Investopedia reported that the June CPI release is due Tuesday and follows a 4.2 per cent year-over-year increase in May. Fed Chair Kevin Warsh is also scheduled to testify before Congress this week, giving investors another signal on the central bank’s inflation and interest-rate outlook.
Earnings Season Begins
Equity investors are also preparing for the start of earnings season.
Major U.S. banks are scheduled to report from Tuesday, while companies including Netflix, GE Aerospace, United Airlines, TSMC and UnitedHealth are also on the calendar this week.
Reuters reported that Citi analysts remain constructive on technology, citing strong earnings growth, momentum and valuations, while also favouring cyclical areas such as Japan, financials and materials.
Apple Lawsuit Adds to Tech Watchlist
Technology investors are also monitoring legal developments after Apple sued OpenAI and two former employees.
Reuters reported that Apple filed the lawsuit Friday, alleging trade secret misappropriation connected to OpenAI’s consumer hardware ambitions.
The case adds another layer of attention to a technology sector already under pressure from AI valuation concerns and semiconductor volatility.
Yen Watches Japan Pension Fund Debate
The yen also remained in focus after Japanese Finance Minister Satsuki Katayama floated the idea of encouraging the country’s $1.8 trillion Government Pension Investment Fund and other retirement funds to bring more money back home.
Reuters quoted NAB senior economist Taylor Nugent as saying a shift from the fund’s current 50/50 domestic-offshore allocation toward a pre-pandemic 60/40 mix could generate large yen-buying flows. He added, however, that allocation changes tend to move slowly and the fiscal 2026 investment plan is already in place.
Asian markets started the week under pressure as renewed U.S.-Iran fighting, uncertainty over the Strait of Hormuz and higher oil prices revived inflation fears. While Trump said the strait remains open, ship traffic has slowed sharply, and Iran’s claims have unsettled traders.
Investors are now watching oil flows, U.S. inflation data, Fed Chair Kevin Warsh’s testimony and the start of corporate earnings season to judge whether the market pullback becomes broader.