Asia-Pacific stocks retreat as oil surges on Middle East tensions

Oil prices spike on Hormuz shutdown threat

Oil prices surged on Thursday after Iran’s new Supreme Leader Mojtaba Khamenei said in a late speech that the Strait of Hormuz, a key route for global crude shipments, should remain shut and warned that Tehran could open other fronts in the ongoing conflict if it persists. Alireza Tangsiri, commander of the Iranian Revolutionary Guard Corps Navy, reinforced the warning, referring to “the harshest blows to the aggressor enemy.”

International benchmark Brent crude jumped 9.22% to close at $100.46 per barrel, its first close above $100 since August 2022. U.S. West Texas Intermediate futures rose 9.72% to settle at $95.73. Analysts at Goldman Sachs expect Brent to average $98 per barrel in March and April—about 40% above their 2025 average forecast—before easing to $71 by the fourth quarter.

U.S. President Donald Trump downplayed the impact of higher oil prices, saying the United States, as the world’s largest oil producer, stands to benefit, while emphasizing that his main objective is to prevent Iran from obtaining nuclear weapons. U.S. Treasury Secretary Scott Bessent said Washington would temporarily allow purchases of already shipped sanctioned Russian crude to stabilize energy markets, describing the move as a response to a “temporary disruption.”

Asia-Pacific equities track Wall Street declines

The surge in oil prices coincided with rising concerns over U.S. growth. Prediction market Kalshi saw the implied probability of a U.S. recession in 2026 increase to 32%, the highest level this year. Major U.S. stock indexes closed at 2026 lows overnight: the Dow Jones Industrial Average fell nearly 740 points to finish below 47,000 for the first time this year, the S&P 500 lost 1.5% to close at 6,672.62, and the Nasdaq Composite declined 1.8% to 22,311.98.

Against this backdrop, Asia-Pacific markets opened in negative territory on Friday. Australia’s S&P/ASX 200 fell 0.3% in early trade. Japan’s Nikkei 225 dropped 2%, while the broader Topix slid 1.4%. Honda Motor declined more than 6%, the largest drag on the Nikkei, after forecasting its first annual loss in almost 70 years.

South Korea’s Kospi index slipped almost 3%, and the Kosdaq shed nearly 2%. Hong Kong’s Hang Seng index eased 0.2%, while mainland China’s CSI 300 index edged 0.3% higher.

Investors are also awaiting key U.S. inflation data. Economists polled by Reuters expect the personal consumption expenditures price index, due Friday, to have risen 2.9% year on year in January, with the core PCE index forecast to accelerate to 3.1%.

FAQ

Why did oil prices rise above $100 per barrel?
Oil prices jumped after comments by Iran’s Supreme Leader Mojtaba Khamenei calling for the Strait of Hormuz to remain shut and signaling the possibility of opening other fronts in the conflict, heightening concerns about disruptions to global energy supplies.

How did major Asia-Pacific stock indexes react?
Australia’s S&P/ASX 200 fell 0.3%, Japan’s Nikkei 225 dropped 2% and Topix 1.4%, South Korea’s Kospi lost almost 3% and Kosdaq nearly 2%, while Hong Kong’s Hang Seng slipped 0.2% and China’s CSI 300 rose 0.3%.

What are Goldman Sachs’ forecasts for Brent crude?
Goldman Sachs expects Brent crude to average $98 per barrel in March and April before declining to $71 by the fourth quarter.

What U.S. economic data are investors watching?
Investors are awaiting the January personal consumption expenditures price index, with economists expecting a 2.9% year-on-year increase and core PCE to rise 3.1%.