Oil rises above $115 and Asia shares slide as Iran war escalates

Asia’s stock markets experienced a sharp decline on Monday as global oil prices surged. Brent crude climbed over 3% to surpass $115 (£86.77) per barrel, while US-traded oil reached $103 following a 3.5% increase. This trend positions Brent for its largest monthly gain since records began. Meanwhile, Japan’s Nikkei 225 and South Korea’s Kospi fell by 4.5% and 4%, respectively.

The recent escalation in the US-Israel-Iran conflict has intensified market anxiety. Iran-backed Houthi rebels in Yemen launched strikes against Israel over the weekend, prompting Iran to threaten broader retaliation, including attacks on US and Israeli institutions. US President Donald Trump, in a Financial Times interview, suggested the possibility of seizing Iran’s key oil hub, Kharg Island, stating,

“I don’t think they have any defence. We could take it very easily.”

He drew parallels to Venezuela, where the US aims to control the oil industry “indefinitely” after capturing control in January.

Iran’s parliament speaker warned of impending action, noting that forces were “waiting for American soldiers” as 3,500 US troops deployed to the Middle East. The volatility in energy markets has been amplified by Tehran’s threats to disrupt shipping in the Strait of Hormuz, a critical route for 20% of global oil and gas. With traffic nearly halted, prices have skyrocketed, raising fears of further supply chain disruptions.

Sean Foley of Macquarie University highlighted concerns about potential blockades, citing the Bab al-Mandeb strait near Yemen as a strategic chokepoint. A closure there could impact an additional 10% of the world’s oil supply,

“putting significant strain on global supply chains,”

he warned. Andrew Lipow of Lipow Oil Associates predicted Brent crude could hit $130 per barrel soon, emphasizing the risk of a worldwide economic slowdown due to rising energy and food costs.

Historically, Brent prices stood at around $72 per barrel on 27 February, before the US and Israel’s strikes on Iran. By 18 March, the benchmark had surged to $119.50, the highest level since June 2022.