Asian Markets Slide as Iran War Keeps Oil at 100 Dollars

Asian markets faced a sharp downturn on Friday, heading toward a second consecutive weekly loss as the geopolitical conflict involving the United States, Israel, and Iran continues to drive energy costs higher. The persistence of oil prices near $100 per barrel has reignited inflation concerns, prompting investors to scale back expectations for interest rate cuts later this year. In regional trading, the Nikkei index in Japan dropped 1.4%, while tech-focused equities in South Korea fell nearly 2%. The broader MSCI Asia-Pacific index declined by 1%, marking a 2.2% retreat for the week. Energy markets remain under intense pressure. Brent Crude Oil was last trading at $100.30 a barrel, despite a temporary 30-day license issued by Washington allowing for the purchase of Russia oil products currently stranded at sea. The threat of supply disruptions in the Strait of Hormuz has kept a floor under prices, complicating the task for global central banks. > "Headlines are coming at the market like water from a fire hose, which is impacting the price of oil, and consequently, financial markets," said Mitch Reznick, group head of fixed income at Federated Hermes. The shift in the inflation outlook has led to a significant repricing of monetary policy. Traders are now anticipating only 20 basis points of easing from the Federal Reserve this year, a sharp contrast to the 50 basis points expected just a month ago. This hawkish turn has bolstered the dollar as a safe-haven asset, pushing the yen to its weakest level against the greenback since July 2024. > "With the possibility of higher oil prices still elevated, investors should be prepared for continued volatility and potentially further downside in the near term," said Vasu Menon, managing director of investment strategy at OCBC in Singapore. The rising yield environment has also weighed on traditional safe havens. Both Silver and Gold saw declines over the week as the prospect of higher-for-longer interest rates reduced the appeal of non-yielding assets. Gold was trading at $5,101 per ounce on Friday, on track for a 1% weekly drop. Looking ahead, investors are bracing for a series of high-stakes policy meetings. While the Federal Reserve and the European Central Bank are expected to maintain current rates, the Reserve Bank of Australia is widely anticipated to implement a rate hike next week. Markets will also closely monitor updates from the Bank of England in the United Kingdom and the Bank of Japan for further direction on global liquidity.