In Japan, the Nikkei 225 ended the day sharply lower, falling about 1.5% and shedding nearly 900 points. Broad-based selling hit cyclical and consumer-related stocks, in a risk-averse environment that favored the yen and penalized exporters. In Hong Kong, the Hang Seng Index declined by around 2%, with steep losses in travel, energy and technology shares. Moves were more contained in mainland China, where the Shanghai Composite showed greater resilience, hovering around flat territory thanks to support from financial stocks and some large state-owned companies. Meanwhile, South Korea’s market was closed for a holiday, leaving the KOSPI shut as investors await to assess the impact of tensions upon reopening.
The main driver of the session was the surge in Brent crude, which jumped sharply following reports of an intensification of military confrontation between the United States, Israel and Iran. The rise in energy prices reignited global inflation concerns, fueling equity sell-offs and pushing investors toward safe-haven assets such as gold and government bonds. Oil prices climbed more than 7% at the peak of the Asian session, immediately hitting sectors most sensitive to fuel costs, particularly transportation and airlines.
The aviation sector was the worst performer of the day. In Hong Kong, Cathay Pacific fell more than 4%, reflecting both higher fuel costs and concerns over potential disruptions to international routes. In Singapore, Singapore Airlines posted even steeper losses, around 8%, while in Japan, Japan Airlines dropped more than 7%, also pressured by weaker sentiment toward travel-related stocks. Heavy selling also hit major Chinese carriers: Air China, China Southern Airlines and China Eastern Airlines closed down between 4% and 10%, amid broad risk aversion. Traders fear that a prolonged crisis could translate into structurally higher operating costs and reduced demand for international travel, negatively affecting sector margins.
Beyond the geopolitical front, markets continue to monitor the evolution of global inflation. The recent rise in energy commodities could complicate the monetary easing path expected in the coming months, particularly in the United States, reinforcing the “higher for longer” rates scenario. This mix of geopolitical uncertainty and inflationary pressure has fueled a clear risk-off environment: reduced equity exposure, selling in cyclical stocks and rotation toward defensive sectors.
Andrea Pelucchi