Asian stock markets fell sharply on Friday as investors weighed the possibility of a prolonged US-Iran conflict and its impact on oil prices, inflation and global interest rates.
South Korea and Japan led the regional declines, while major markets across Asia also moved lower. Investors remained cautious as rising energy costs threatened to increase inflation and complicate central bank policy.
South Korea and Japan Lead Market Declines
South Korea’s Kospi dropped around 2.7%, with major technology companies facing heavy selling pressure.
SK Hynix shares fell about 4%, while Samsung Electronics declined 3.8%. Meanwhile, the small-cap Kosdaq index lost more than 2%.
Japan’s Nikkei 225 fell 2.6%, while the broader Topix index declined 1.86%.
Elsewhere, Australia’s S&P/ASX 200 dropped 1%, while Hong Kong’s Hang Seng Index fell 1.4%. Mainland China’s CSI 300 also declined 0.9%.
Japan’s Nikkei futures had already signalled further weakness before the market opened. Chicago and Osaka contracts stood at 63,600 and 63,540, respectively, compared with the previous close of 65,270.95.
Prolonged Iran Conflict Raises Concerns
Investor sentiment weakened further following reports that senior White House advisers discussed the possibility of the Iran conflict continuing beyond President Donald Trump’s current term.
Such a scenario could extend the conflict beyond January 2029. However, the reported assessment contrasts with Trump’s recent comments that the war could end soon after the US midterm elections.
Trump has also said oil and gasoline prices could decline after the elections.
Consequently, investors remain focused on how long the conflict could continue and how it might affect global energy markets.
Oil Prices Add Pressure to Global Markets
Oil prices have become a major source of concern for investors.
West Texas Intermediate crude futures climbed above $100 per barrel on Thursday. Both Brent and WTI settled at their highest levels since May 19 amid continued fighting between the United States and Iran.
Higher oil prices could further increase inflation and force central banks to maintain tighter monetary policies for longer.
US Treasury yields also moved higher as energy prices increased. The 10-year Treasury yield rose above 4.95%, reaching its highest level since October 2023.
US Markets Extend Losing Streak
US stock futures remained mostly unchanged overnight as investors awaited August consumer price data.
S&P 500 futures edged higher, while Dow Jones futures fell 11 points. Nasdaq 100 futures gained less than 0.1%.
However, US equities extended their losing streak on Thursday. The Dow Jones Industrial Average dropped more than 300 points, or 0.6%.
The S&P 500 also fell 0.6%, while the Nasdaq Composite declined 0.7%. All three major indexes have now recorded four consecutive sessions of losses.
Investors Await US Inflation Data
Markets are now watching the August US Consumer Price Index (CPI) report, scheduled for Friday.
Economists surveyed by Dow Jones expect consumer prices to rise 0.4% month-on-month. They also expect annual inflation to reach 3.4%.
The data could influence expectations for the Federal Reserve’s September 16 policy meeting.
Moreover, Thursday’s producer price data showed wholesale prices rising 0.4% month-on-month and 5.4% year-on-year.
Therefore, investors will closely assess the inflation figures for signs of how rising energy costs could influence the Federal Reserve’s next interest-rate decision.
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