Asian Stocks Set to Fall as Oil Surges Past $100: Markets Wrap

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(Bloomberg) — Stocks in Asia were poised for declines after a sharp Wall Street selloff, while oil surged above $100 a barrel for the first time in two months as an escalating Middle East conflict stoked fears of renewed inflation.

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Equity-index futures pointed to losses in Australia, Japan and South Korea after the S&P 500 fell 1.2%, its biggest one-day drop in a month, and the tech-heavy Nasdaq 100 lost 1.9%. A gauge of megacap stocks suffered its worst session since the tariff-driven market rout in April 2025, underscoring investors’ retreat from risk assets.

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West Texas Intermediate crude extended gains in early Asian trading after global benchmark Brent closed at $100.69 a barrel Thursday, pushing Treasury yields and the dollar higher. The moves came as US President Donald Trump threatened to intensify the conflict with Iran after Houthi militants attacked two Saudi Arabian oil tankers in the Red Sea, fueling concerns over potential disruptions to global energy supplies.

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The spike in energy prices has revived prospects that inflationary pressures may prove more persistent, complicating the Federal Reserve’s policy path. Money markets now fully price in a Fed interest-rate increase by September, with investors now monitoring whether a sustained rise in oil prices spills over into broader inflation expectations and corporate earnings.

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“Escalating Middle East tensions have pushed crude prices higher, raising concerns that inflation could re-accelerate and delay interest-rate relief, maybe even cause the Fed to hike,” said Sameer Samana at Wells Fargo Investment Institute. “We think oil prices eventually normalize, but appreciate that things may get worse before they get better.”

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The latest escalation has increased strains on global energy supply chains. Fighting around Iran has already disrupted shipping through the Strait of Hormuz, the gateway to the Persian Gulf, while attacks in the Red Sea threaten the alternative route Saudi Arabia has relied on to keep crude flowing.

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The market is also contending with a spate of attacks at the Caspian Pipeline Consortium terminal on Russia’s Black Sea coast, which exports most of Kazakhstan’s crude. Inventories across the globe are depleted by months of conflict, raising the risk of a supply squeeze that threatens to weigh on the global economy if prices continue to climb. 

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“Round 2 of the military conflict is going to be broader than Round 1,” Bob McNally, president of Rapidan Energy Group and a former White House official, said in a Bloomberg Television interview, referring to the Iran war. “The risks are great, not only to shipping, but also to energy infrastructure.” 

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The geopolitical backdrop is adding to investor scrutiny of the AI trade, with markets increasingly demanding evidence that massive spending on artificial intelligence will generate commensurate earnings growth. Alphabet Inc. fell 6.9% after raising its capital-expenditure forecast, while Tesla Inc. tumbled 15% as profits disappointed despite strong electric-vehicle deliveries. Alongside Alphabet, Meta Platforms Inc., Microsoft Corp. and Amazon.com Inc. telegraphed in April they’d be spending as much as $725 billion this year on AI ambitions.