Global Market Today | Asian stocks track US declines as oil remains in focus

Synopsis

Asian stocks mirrored US declines as fears of the Iran war impacting energy supplies and boosting inflation intensified. Oil prices, though slightly lower Friday, remained elevated due to defiant rhetoric regarding the Strait of Hormuz. Investors are now pricing in prolonged inflation and potential impacts on corporate earnings, with Treasury yields rising on inflation worries.

Asian stocks followed US peers lower in early trading Friday, with oil prices in focus on growing fears that the war in Iran will further crimp energy supplies and boost inflation.

A gauge of Asian shares dropped 0.5% in early trading after the S&P 500 slid 1.5% to its lowest since November. Even investors that had rotated into the apparent safety of large US tech companies felt the sting as the Nasdaq 100 declined 1.7% on Thursday and a gauge of megacaps approached the threshold of a correction. US index futures advanced at the open, suggesting some relief in markets.

Oil edged lower on Friday after climbing to its highest close since August 2022 as President Donald Trump and Iran’s new supreme leader both struck defiant tones, with the latter saying the Strait of Hormuz should remain shut.

“It feels as though the market has taken its timeline for the duration of the closure of the Strait of Hormuz, and the conflict more broadly and pushed it further out, suggesting this could have a more damaging effect on inflation and potentially consumption patterns, and at some stage, possibly even corporate earnings,” Chris Weston, head of research at Pepperstone Group, wrote in a note.

Goldman Sachs Group Inc. warned that oil prices could exceed the 2008 peak if flows via Hormuz remain depressed through March. Brent rallied to a high of $147.50 that year. The Iran war is causing unprecedented turmoil in oil markets, hitting 7.5% of global supply and an even bigger swath of exports, the International Energy Agency said.

Treasuries were steady in early Friday trading after falling across the curve in the previous session as inflation worries grew. Traders have now scrapped expectations for any Federal Reserve rate cuts in 2026. The policy-sensitive US two-year yield climbed nine basis points to 3.74% Thursday and the 10-year rose three basis points to 4.26%.

A gauge of the dollar edged lower on Friday after closing at its highest level in almost two months.

Traders will also be on the lookout for US inflation data due later, although the backward-looking measure may do little to alter investors’ thinking given the geopolitical uncertainty.

Trump said in a social-media post that preventing Iran from having nuclear weapons and threatening the Middle East is “of far greater interest and importance to me” than the cost of oil.

Separately, his administration plans to waive a century-old maritime law that requires American ships be used to transport goods between US ports as it seeks to blunt surging oil prices, Bloomberg News reported. The US Navy could start escorting tankers through the Strait of Hormuz by the end of March, Energy Secretary Chris Wright told CNBC.

With the Fed widely expected to hold rates steady next week, investors will be closely watching for any shifts in its outlook, as Trump renews calls for the central bank to cut interest rates.

“The most hawkish outcome would be if the Fed removed its easing bias from the statement, while the median projection shifted from one cut this year to no change,” said Stephen Brown at Capital Economics.

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