WAR IN MIDDLE EAST WORSENS
The broader market though, remains focused on the war in the Middle East and is coming to the realisation that the conflict is shaping up to be a prolonged one, stoking stagflation risk.
Iran accused Israel of striking its facilities in the huge South Pars gas field on Wednesday and retaliated by vowing attacks on oil and gas targets throughout the Gulf, firing missiles at Qatar and Saudi Arabia.
The hits to energy infrastructure sent US crude futures about 1 per cent higher to US$97.07 per barrel. Natural gas rose more than 6 per cent, while Brent futures rose to US$112.19 a barrel, up 4.5 per cent on the day.
In stocks, Japan’s Nikkei was down 2.5 per cent, while South Korean equities fell 1.5 per cent. MSCI’s broadest index of Asia-Pacific shares outside Japan fell more than 1.5 per cent. European futures were down more than 1 per cent.
“This latest escalation feels like a turning point for markets because the conflict is no longer just about military headlines or Strait of Hormuz closure,” said Charu Chanana, chief investment strategist at Saxo in Singapore.
“It is now hitting the plumbing of the global energy system. What is unsettling markets now is the growing stagflation risk… It means this is no longer just a geopolitical story but a macro one.”
The dollar strengthened across the board, also buoyed by the Fed predicting just one more cut this year as the central bank left rates unchanged on Wednesday. Traders though are no longer fully pricing in any easing in 2026.
The dollar index, which measures the US currency against six other units, is up 2.5 per cent this month. The index was last at 100.06, slightly lower after a 0.7 per cent rise on Wednesday.