Asian equities retreat as Iran war escalation remarks hit risk sentiment

Asian markets reverse April gains

Asian equities declined broadly on Thursday, with South Korea’s KOSPI emerging as the weakest major market in the region. The index fell 3.7%, giving back strong gains from the prior session and moving back towards lows seen in March.

Japanese shares also posted notable losses. The Nikkei 225 declined 2%, while the TOPIX index dropped 1.2%, similarly reversing a strong rebound from the previous day and heading back toward March lows.

In China, the Shanghai Shenzhen CSI 300 index fell 0.7% and the Shanghai Composite lost 0.5%. Renewed weakness in technology stocks weighed on Hong Kong’s Hang Seng index, which declined 1%. Australia’s ASX 200 fell 1.1%, and Singapore’s Straits Times index lost 0.7%. Futures for India’s Nifty 50 index were down 1.6%.

The sell-off came after S&P 500 Futures slid more than 1%, erasing the positive impulse from an earlier strong overnight session on Wall Street.

Market reaction to U.S. stance on Iran and Hormuz

Risk appetite deteriorated rapidly after President Trump said the United States would ramp up military actions against Iran over the next two to three weeks, dashing earlier hopes for a de-escalation in the conflict. Trump stated that the U.S. would hit Iran “extremely hard” in the coming weeks and called on Tehran to either accept a ceasefire or face strikes on its electricity infrastructure.

Addressing the situation at the Strait of Hormuz, Trump indicated that the United States would not push to reopen the crossing. He said that countries dependent on Hormuz should either buy oil from the U.S. or take steps to reopen the passage themselves.

Oil prices jumped as much as 5% following the remarks, as markets anticipated continued disruptions in energy supplies. The Strait of Hormuz is a key route for oil and gas shipments to several major Asian economies, and higher energy prices are expected to feed into increased inflation in the coming months.

FAQ

Which Asian markets fell the most?
South Korea’s KOSPI was the worst performer, dropping 3.7%. Japan’s Nikkei 225 fell 2% and the TOPIX declined 1.2%, while the Hang Seng, CSI 300, Shanghai Composite, ASX 200, and Straits Times also recorded smaller losses.

What triggered the decline in Asian stocks?
The decline followed comments by U.S. President Donald Trump signaling an escalation in military action against Iran over the next two to three weeks, which weakened risk sentiment and pushed S&P 500 Futures down more than 1%.

How did oil prices react?
Oil prices rose as much as 5% after Trump’s comments, reflecting concerns about continued disruptions in energy markets linked to the situation around Iran and the Strait of Hormuz.

Why is the Strait of Hormuz significant for Asia?
The Strait of Hormuz is a critical corridor for oil and gas shipments serving several major Asian economies, making its status an important factor for regional energy supply and inflation dynamics.