MSCI’s broadest index of Asia-Pacific shares outside Japan fell 0.9%, with South Korea’s KOSPI leading regional declines, dropping 3%. US stock futures also pointed to a weaker open, with S&P 500 futures down 0.3%.
The risk-off mood intensified after the US military launched a fresh round of strikes on multiple targets in Iran. The move came hours after President Donald Trump warned of further attacks if a peace agreement is not reached. Iran responded by announcing the closure of the Strait of Hormuz, a critical global energy shipping route.
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Oil prices moved higher following the developments, with Brent crude climbing 2% to nearly $95 a barrel during Asian trading hours.
The latest geopolitical flare-up has added pressure on Asian markets that had rallied strongly over the past two months, particularly technology-heavy markets such as South Korea and Taiwan.
Market participants are increasingly questioning whether the robust earnings growth expectations that fuelled the rally can be sustained amid rising geopolitical and macroeconomic risks.
The cautious sentiment followed a weak session on Wall Street, where the S&P 500 fell 1.6%, and the Nasdaq Composite dropped 2%. Investors reacted to data showing US inflation accelerated in May at its fastest pace since April 2023, reinforcing concerns that interest rates could remain higher for longer.
The stronger inflation print has also shifted expectations around Federal Reserve policy. Traders marginally increased bets that the US central bank’s next rate hike could come as early as October, although expectations remain finely balanced.
