Global Markets Tumble as US-Iran Tensions Escalate, Oil Surges

Asian stock markets fell sharply on Monday as rising geopolitical tensions between the United States and Iran rattled investors, pushing U.S. bond yields to eight-month highs and sending oil prices on another volatile swing.

Iran threatened to target Gulf neighbors' energy and water infrastructure if the U.S. followed through on President Donald Trump's warning to strike Iran's power grid within 48 hours. Trump also demanded Iran reopen the Strait of Hormuz — a critical global oil shipping lane now largely inaccessible — further dimming hopes for a near-term ceasefire in a conflict now entering its fourth week.

Asian equities took a heavy blow. Japan's Nikkei plunged 3.9%, extending its March decline beyond 13%, while South Korea's market dropped 4.5%, down roughly 12% for the month. The broader MSCI Asia-Pacific index excluding Japan fell 1.2%. European and U.S. futures also pointed lower, with DAX and EUROSTOXX 50 futures each sliding 1.2%.

Oil markets remained turbulent. Brent crude hovered around $111.90 per barrel — still up 55% month-to-date — while U.S. crude held near $98.35. Investment strategists warn prices could climb to $150 per barrel if the conflict continues, with prolonged damage to energy infrastructure delaying any supply recovery.

The inflationary pressure from surging energy costs has forced a dramatic shift in global monetary policy expectations. Markets have fully priced out anticipated Federal Reserve rate cuts, with some traders now betting on hikes instead. Ten-year U.S. Treasury yields climbed to 4.41%, up 44 basis points since hostilities began. Rising yields are squeezing government finances, compressing corporate profit forecasts, and stretching equity valuations.

The U.S. dollar strengthened amid the uncertainty, benefiting from its safe-haven status and the country's position as a net energy exporter. Gold edged up 0.4% to $4,511 per ounce, even as rate hike bets kept a lid on bigger gains.