As traders wagered that rising oil prices, fueled by the intensifying US-Iran conflict, might increase global inflation, Asian stock markets plummeted on Friday. Following Houthi strikes on ships in the Red Sea, Brent crude contracts surged above $100 per barrel on Thursday, stoking fears of shortages in the energy markets.
The Kospi index in South Korea lost 5%, the Nikkei in Japan dropped 3%, and the Shanghai Stock Exchange dropped 1.4%. Results from Alphabet, the company that owns Google, and Tesla, whose stock fell on Thursday after they revealed spending billions of dollars on AI, also shook the markets.
However, the increase in crude futures has raised predictions of global price increases, which could compel central banks to raise interest rates. Tensions between the US and Iran have increased, and the Houthis, who are backed by Tehran, are attacking ships that are passing through the Red Sea, including oil tankers. This has led to an increase in oil prices.
The most recent round of strikes has also caused traffic to slow down once more across the Strait of Hormuz, another chokepoint. There is growing concern that interruptions on two vital oil routes could result in shortages and further increase prices.
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