Gulf Ceasefire Cracks Rattle Asian Markets and Push Oil Prices Higher

Optimism in Asian financial markets faded quickly on Thursday as early signs of instability in the Gulf ceasefire sent oil prices climbing again, reinforcing fears of a prolonged inflationary impact on the global economy. The fragile truce, which had briefly lifted investor sentiment, now appears increasingly uncertain as tensions in the region persist.

A key concern is the Strait of Hormuz, the critical waterway through which roughly one-fifth of the world's oil supply flows. Iran continues to exert significant influence over the passage, reportedly demanding tolls for safe transit. Nigel Green, CEO of deVere Group, cautioned that markets may be underestimating the risk, noting that a full blockade isn't necessary to trigger another sharp spike in oil prices. Ongoing missile activity in the Gulf and continued Israeli military engagement elsewhere in the region add further uncertainty to an already volatile situation.

Reflecting these concerns, U.S. crude futures rose 2.8% to $96.99 per barrel, while Brent crude gained 2.1% to reach $96.74. Japan's Nikkei traded near flat after surging 5.4% the previous session, while South Korea's index slipped 0.4% following a 6.8% jump. Broader Asia-Pacific equities, as tracked by MSCI's regional index, edged down 0.3%.

With oil prices still around 40% above pre-conflict levels, inflationary pressure is expected to show up increasingly in economic data worldwide. U.S. core inflation figures for February, due Thursday, were projected to rise 0.4% for a second consecutive month, even before accounting for the latest energy cost surge.

Federal Reserve meeting minutes signaled growing concern about inflation, with some policymakers open to a rate hike. Markets now price in just 7 basis points of easing for the remainder of the year. Meanwhile, the euro held steady at $1.1660 against the dollar, and gold traded flat at $4,718 per ounce after briefly touching $4,777 overnight.