Asian stocks drop as US-Iran clashes send oil surging

Asian equity markets fell on Tuesday as renewed fighting between the United States and Iran near the Strait of Hormuz sent oil prices surging, reigniting inflation concerns and raising the prospect of further monetary tightening by the Federal Reserve.

The US and Iran exchanged strikes for the first time in about a month, with American forces hitting an island in the Strait of Hormuz and Iran responding with attacks on the United Arab Emirates and Jordan, according to Bloomberg. West Texas Intermediate crude rose above $86 a barrel in early Asian trading, while Brent crude topped $91.swissinfo

Chip Stocks Lead Declines Across the Region

Japan's Nikkei 225 fell more than 1%, dragged lower by semiconductor and chip equipment stocks. Tokyo Electron declined 2.9%, Renesas Electronics dropped 2.9%, and Lasertec ↗ 9.68% fell 3.1%, according to The Wall Street Journal News Corp ↘ 0.03%. Kioxia lost 2%, while SoftBank shares fell 1.3%.wsj+1

South Korea's Kospi also dropped more than 1%, losing the 6,800-point level. Samsung Electronics fell 1.4%, slipping below the 260,000 won mark, while SK Hynix ↗ 2.78% declined 0.7%. The MSCI Asia Pacific Index slipped 0.2%, and futures pointed to further losses in Hong Kong and Sydney.tradingkey+1

Oil Surge Compounds Fed Hawkishness

The spike in energy prices compounded existing pressure from hawkish signals out of the Federal Reserve. Money markets increased bets on a September interest-rate hike after Fed Chair Kevin Warsh reinforced his commitment to fighting inflation at the Jackson Hole symposium last week. Rising energy costs pushed the 10-year Treasury yield to 4.77%, the highest level since January 2025.swissinfo

"With traders tracking geopolitical volatility as well as potential seasonal volatility, it will be interesting to see which market impulse from last week might carry over to this week," said Chris Larkin at E*Trade from Morgan Stanley ↘ 0.55%.swissinfo

Jobs Data in Focus

Attention now turns to Friday's August US payrolls report, which could further shape rate expectations. JPMorgan Chase's ↘ 0.84% Andrew Tyler said he has shifted to a "tactically cautious" view on US stocks for the coming weeks, though he noted the September 11 consumer-price report would be even more critical given the Fed's assessment that the economy is at full employment.swissinfo