Asia in the red as geopolitical tensions and oil weigh on markets: Kospi plunges, Nikkei falls sharply

A decisively negative close for Asian markets on March 3, 2026, dominated by a marked climate of risk aversion. Geopolitical tensions in the Middle East, with the intensifying confrontation between the United States, Israel and Iran and fears of potential repercussions on strategic energy routes, triggered widespread selling across the region’s equity markets.

Leading the declines was the KOSPI, which ended around 5,791.91 points, down approximately 7.2%, marking one of its worst daily performances in recent months. The South Korean benchmark, heavily exposed to global flows and sensitive to the technology and industrial sectors, was hit by the flight from riskier assets and rising energy costs. Heavy selling particularly affected major exporters and manufacturing-related stocks.

The Nikkei 225 also closed sharply lower, finishing at 56,279.05 points, down about 3.1%. The Japanese market reflected both the rise in oil prices - with Brent returning to the $79–80 per barrel range - and the strengthening of the U.S. dollar during periods of stress, a factor that increases volatility in currency flows and international trade. Cyclical sectors, from transportation to technology, were among the hardest hit, while energy and defense stocks showed relative resilience.

Losses were more contained for the Hang Seng Index, which slipped about 0.3% to around the 26,000-point level. Hong Kong’s market benefited from more selective investor positioning and partial support for financial and infrastructure stocks, though it remained within a broader framework of caution.

The Shanghai Composite showed comparatively greater stability, limiting fluctuations relative to other regional markets and confirming a degree of resilience in mainland China’s exchange. The domestic market appears less exposed to speculative international flows and more supported by internal dynamics, although global sentiment remains a risk factor.

On the macroeconomic front, rising energy prices are fueling concerns about renewed inflationary pressures and the potential tightening of global financial conditions. In this context, investors favored safe-haven assets such as gold and government bonds, reducing equity exposure. As long as international tensions and uncertainty over energy supplies remain elevated, volatility is likely to stay at the forefront, with Asian indices particularly sensitive to any signs of escalation or de-escalation.

Andrea Pelucchi