The decline in global stock markets intensified due to the Iran conflict. South Korea fell 7% and Samsung fell 10%. Oil prices continued to rise and the bond market came under pressure.

# By Bao Yilong & Zhang Yaqi

Source: Wall Street CN

The MSCI Asia Pacific Index fell as much as 2% on Tuesday, while South Korea’s KOSPI plunged 7% during the session, with shares of SK Hynix and Samsung extending losses to nearly 10%. After surging roughly 7% on Monday, Brent crude extended gains on Tuesday, approaching the previous session’s high near $79.57 a barrel. The sharp rise in energy prices has stoked market concerns over the inflation outlook, pushing Japan’s 40-year government bond yield up 5 basis points to 3.555%.

Escalating conflicts in the Middle East have triggered a fresh round of turmoil across global financial markets. Equities deepened their losses, bonds were sold off, rising oil prices reignited inflation fears, and safe-haven assets such as gold continued to find strong demand.

On Tuesday, the MSCI Asia Pacific Index dropped as much as 2.5%, marking its worst two-day cumulative decline since April. South Korea’s KOSPI plummeted 7% during the session, with SK Hynix and Samsung falling nearly 10%. U.S. and European stock futures traded lower in tandem, signaling the selloff may spread. After surging more than 7% on Monday, Brent crude moved closer to the $80-a-barrel threshold.

U.S. President Trump stated that U.S. military operations against Iran have no fixed timeline, while Secretary of State Rubio warned that “the most ferocious strikes by U.S. forces are yet to come.” Tehran has threatened to fully shut down the Strait of Hormuz—a critical global oil shipping artery—sending market fears of supply disruptions soaring.

The latest shock has compounded pre-existing market fragilities: before the conflict erupted, global equity valuations were already elevated, and the sustainability of massive capital spending on artificial intelligence had come into question. Inflation worries sparked by soaring oil prices have further eroded market expectations for multiple Federal Reserve rate cuts this year. Markets have pushed back the pricing of the first Fed rate cut to September, while expectations for a third rate cut in 2026 are fading.

Japan’s Nikkei 225 extended losses to 3%, currently at 56,292.02 points. South Korea’s KOSPI plunged 7% during the session. Shares of SK Hynix and Samsung fell nearly 10%.

U.S. stock futures traded lower, with Nasdaq 100 futures extending losses to 1%. S&P 500 futures fell 0.7%.

Australia’s S&P/ASX 200 closed down 1.3% at 9,077.30 points.

The U.S. Dollar Index extended the previous session’s 0.7% gain.

The South Korean won fell as much as 1.9% against the U.S. dollar to 1,467.8, its lowest level since February 24.

The 10-year U.S. Treasury yield held near the previous session’s 4.04%.

Australia’s 10-year government bond yield jumped 10 basis points to 4.73% in early Tuesday trade.

Japan’s 5-year government bond yield also rose more than 5 basis points to 1.585%. Japan’s 40-year government bond yield climbed 5 basis points to 3.555%.

After surging more than 7% on Monday, Brent crude extended gains on Tuesday, moving closer to $80 a barrel.

Gold rose 0.7% to around $5,360 an ounce; silver gained 0.3%, trading near $90 an ounce.

Asia-Pacific equities lead declines; U.S. and European futures follow

Asia-Pacific stocks fell across the board on Tuesday. The MSCI Asia Pacific Index dropped as much as 2%, while Japan’s Nikkei 225 extended losses to 3%, currently at 56,292.02 points. South Korea’s KOSPI plunged 7% during the session, with SK Hynix and Samsung falling nearly 10%.

Despite intensifying short-term volatility, Timothy Moe, Chief Asia Pacific Equity Strategist at Goldman Sachs, told media that the Middle East situation could act as a catalyst for a “long-overdue technical correction” in markets—but from a strategic perspective, it presents an opportunity to position for Asian assets, given the region’s still constructive fundamentals.

Nick Ferres, Chief Investment Officer at Vantage Point Asset Management, argued that Monday’s market moves appeared to price in a short-lived conflict, “but that assessment may be overly optimistic.” He also noted that before the conflict broke out, markets were already concerned about the sustainability of AI capital spending, technological disruption, and its financing models.

Ana Isabel Gonzalez Encinas, Group Chief Investment Officer at Farringdon Asset Management, stated that the core market question is duration—whether this is a brief risk-premium shock or a prolonged shakeup that will start weighing on corporate capital expenditure and hiring decisions.

Oil prices climb; bond markets under pressure

The U.S. and Israel have continued strikes against Iran, with Tehran threatening to block the Strait of Hormuz. Surging oil prices have boosted inflation expectations, prompting traders to push back their forecast for the Fed’s first rate cut to September, while expectations for a third cut in 2026 have all but vanished. The repricing of the interest-rate outlook has pressured both equities and bonds.

After surging roughly 7% on Monday, Brent crude extended gains on Tuesday, approaching the previous session’s high near $79.57 a barrel.

Goldman Sachs traders cited historical data showing that in 22 instances since 2000 when WTI crude rose more than 10% in a single day, the S&P 500 typically turned positive after an initial decline.

However, the sharp rise in energy prices has stoked inflation concerns, keeping the 10-year U.S. Treasury yield near the previous session’s 4.04%. Australia’s 10-year government bond yield jumped 10 basis points to 4.73% in early Tuesday trade, while Japan’s 5-year government bond yield rose more than 5 basis points to 1.585%.

Reserve Bank of Australia Governor Michele Bullock said the central bank is “highly vigilant” about the potential impact of the Middle East conflict on inflation expectations and stands ready to implement policy responses if necessary.

According to Bloomberg strategist Mark Cranfield, bonds in Australia, Japan, and South Korea were all in decline, with Tuesday’s Asian fixed-income market facing a tougher backdrop than implied by overnight moves in U.S. Treasuries.

Safe-haven assets remain in demand

Against a backdrop of waning risk appetite, demand for safe-haven assets has rebounded sharply. Gold rose 0.7% on Tuesday to around $5,360 an ounce; silver gained 0.4%, trading near $90 an ounce.

Oriano Lizza, Sales Trader at CMC Markets Singapore, said: “This is no longer just headline risk—it’s truly entering the pricing phase. Sentiment is bearish, and clients are turning to safe-havens like gold for shelter.”

Anna Wu, Cross-Asset Investment Strategist at Van Eck Associates Corp in Sydney, noted that Trump’s “whatever it takes” rhetoric has escalated the Iran narrative, “which will extend the duration of the volatility shock.”

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