Asia Markets Tumble as Gulf Conflict Drives Oil Prices to Historic Highs

Asian stock markets fell sharply on Monday as investors braced for a prolonged Gulf conflict that has sent oil prices surging to their highest monthly gains in decades, raising serious concerns about global inflation and a potential recession.

Reports emerged that U.S. President Donald Trump had floated the idea of seizing Iran's Kharg Island — a critical oil export hub — though he also suggested a ceasefire could happen soon. Meanwhile, Pakistan announced plans to host peace talks in the coming days, while Iran accused Washington of preparing a ground assault as additional U.S. troops moved into the region. Yemen's Houthi forces, aligned with Tehran, also launched fresh attacks on Israel, further escalating tensions.

The closure of the Strait of Hormuz has triggered dramatic price increases across energy and commodity markets. Oil, natural gas, fertilizers, plastics, and aluminum have all spiked, with ripple effects expected across food, pharmaceuticals, and petrochemical industries. Brent crude climbed 3% to $115.98 per barrel, marking a staggering 60% monthly gain — surpassing the surge that followed Iraq's invasion of Kuwait in 1990.

Asia is bearing the brunt of the turmoil given the region's heavy reliance on Middle Eastern energy. Japan's Nikkei dropped 4.7%, accumulating nearly 14% in losses for March. South Korea's market fell 4.2%, and the broader Asia-Pacific index declined 1.2%. European and U.S. futures also pointed lower.

JPMorgan economists warned that if the Strait remains closed for another month, oil prices could climb toward $150 per barrel, severely straining industrial energy consumers worldwide.

On the monetary policy front, expectations have shifted dramatically. Markets now anticipate the Federal Reserve will tighten rates by 12 basis points this year, a sharp reversal from forecasts of 50 basis points in cuts just weeks ago. Treasury yields and the U.S. dollar have both strengthened, while gold edged lower despite the volatile environment.