Asian Markets Plunge as Iran Tensions Push Oil Prices Higher
Asian markets took a hit on Monday as tensions between the US and Iran escalated, pushing oil prices higher. The Nikkei in Japan dropped by 1.6%, while South Korean shares fell by 2.2%. Investors were spooked by the renewed fighting between the two nations, which raised concerns about inflation and interest rates.
The price of Brent crude rose to around $90 a barrel after US forces struck Iranian launchers on Larak Island in the Strait of Hormuz on Sunday. This followed Iranian attacks targeting US forces in Jordan. The increase in oil prices is likely to keep inflation elevated, making it more challenging for central banks to control.
The market's reaction was also influenced by comments from US Federal Reserve Chair Kevin Warsh, who indicated that more work was needed to bring inflation under control. This has led to increased expectations of a possible US interest rate rise in September, with the probability estimated at around 57%.