SINGAPORE, June 23 — Asian markets edged lower on Monday while oil briefly surged to five-month highs, as global investors weighed the possibility of Iranian retaliation following U.S. airstrikes on key nuclear facilities in Iran. The strikes have heightened fears of a broader regional conflict, with potential ripple effects on global energy flows, inflation, and economic stability.
Despite the geopolitical alarm, market reactions were largely restrained. Brent crude rose as much as 2.8% early in the day before paring gains, settling at 1.8% higher at USD 78.42 a barrel. U.S. West Texas Intermediate (WTI) crude climbed 1.9% to USD 75.26.
“Markets may be responding not to the escalation itself, but to the perception that it could reduce longer-term uncertainty,” said Charu Chanana, chief investment strategist at Saxo. “That said, any sign of Iranian retaliation or threat to the Strait of Hormuz could quickly shift sentiment and force markets to reprice geopolitical risk more aggressively.”
The Strait of Hormuz — a narrow but vital channel through which roughly 25% of the world’s oil and 20% of its liquefied natural gas (LNG) flows — remains the single biggest flashpoint. A disruption here, analysts warn, could send energy prices soaring.
Goldman Sachs estimates that a one-month closure of the strait could push Brent prices to USD 110 per barrel. The Commonwealth Bank of Australia’s Vivek Dhar said, “In a scenario where Iran selectively disrupts shipping through the Strait of Hormuz, we see Brent oil reaching at least USD 100/bbl.”
JPMorgan analysts added that historical episodes of regime change in the region have triggered oil spikes of up to 76%, typically averaging 30% increases.
Meanwhile, broader financial markets showed signs of cautious resilience. MSCI’s Asia-Pacific index outside Japan fell 1.0%, while Japan’s Nikkei slipped 0.6% despite positive news that manufacturing activity returned to growth in June for the first time in a year. Chinese blue-chip stocks dipped 0.2%.
U.S. futures were modestly lower, with S&P 500 futures down 0.3% and Nasdaq futures off 0.4%. European futures followed suit — EUROSTOXX 50 dropped 0.4%, Germany’s DAX lost 0.5%, and the UK’s FTSE was down 0.3%. Both Europe and Japan, heavily reliant on imported oil and LNG, are particularly exposed to energy shocks stemming from Middle East instability.
In currency markets, the dollar gained mildly on safe-haven demand, rising 0.3% against the Japanese yen to 146.50. The euro fell 0.2% to USD 1.1500, while the dollar index nudged up to 98.958.
There was little movement in U.S. Treasuries, a typical refuge during crises. Yields on 10-year notes actually rose two basis points to 4.395%, suggesting investors remain hesitant to fully price in worst-case scenarios.
Federal Reserve futures fell slightly, reflecting concern that sustained oil price rises could push up inflation and complicate the central bank’s policy path. Fed Governor Christopher Waller broke ranks last week by suggesting a rate cut in July, but most Fed officials — including Chair Jerome Powell — have so far adopted a more cautious approach. Markets continue to see a higher probability of easing in September.
At least 15 Fed officials are scheduled to speak this week, including Powell, who will face two days of testimony on Capitol Hill. Lawmakers are expected to press him on the dual impact of rising tariffs under President Donald Trump and the potential economic fallout from the U.S. strikes on Iran.
NATO leaders are also expected to discuss the Middle East crisis during a summit in The Hague this week, where a significant increase in defense spending is on the agenda. Meanwhile, investors will also parse fresh data on U.S. core inflation, jobless claims, and global factory activity for early signs of broader economic impact.
For now, markets appear to be treading water — wary but not yet panicked. Whether this calm persists likely depends on Iran’s next move.
