By Ronnie Harui
Asian equities and government bonds fell Monday as continued hostilities in the Middle East stoke fears of a drawn-out war that would cause an inflationary shock that could force central banks worldwide to raise interest rates.
Japan's Nikkei Stock Average dropped 4.1%, South Korea's Kospi shed 5.5%, and Singapore's FTSE Straits Times Index lost 1.9%.
U.S. stock futures also fell, with eMini S&P 500 futures declining 0.5%, eMini Nasdaq 100 futures down 0.6% and eMini Dow futures off by 0.3%.
As the U.S.-Israel war with Iran stretches into a fourth week, markets are starting to increasingly worry that a lasting disruption in energy supplies will spill over into other commodities, affecting industries from agriculture to aviation.
A major focal point is the blockage of the Strait of Hormuz, a key shipping lane for the world's oil and gas supplies, as well as other key materials like fertilizers.
In a Truth Social post, President Trump said: "If Iran doesn't FULLY OPEN, WITHOUT THREAT, the Strait of Hormuz, within 48 HOURS from this exact point in time, the United States of America will hit and obliterate their various POWER PLANTS, STARTING WITH THE BIGGEST ONE FIRST!"
When asked whether the president plans to slow the war in Iran, Treasury Secretary Scott Bessent said Sunday that the U.S. must "escalate to de-escalate."
Trump's 48-hour ultimatum sets up a potentially volatile start to the week, likely spilling into Tuesday if the deadline passes without resolution, StoneX's Matt Simpson said in a commentary.
"Iran appears to have few favourable options," the senior market analyst said. "Conceding quickly risks signalling weakness, particularly for a new leadership facing internal and external pressure. That raises the risk of a prolonged standoff, which in turn keeps upside risks for oil prices and safe-haven flows firmly in play."
Yields on Asian government bonds climbed Monday morning on worries that central banks the world over could tighten monetary policy to mitigate inflation driven by the recent surge in energy prices.
"The market is becoming increasingly worried [the Middle East] conflict could become a protracted affair, broader in nature and structurally inflationary," National Australia Bank's Rodrigo Catril said in a commentary.
Global bonds have sold off aggressively, the senior FX strategist said. Markets' "hawkish repricing" of central banks' rate paths has continued, with participants now seeing the possibility of an interest-rate increase by the Federal Reserve this year, Catril added.
Yields on Australia's 10-year sovereign debt rose 8 basis points to 5.1030%, those on New Zealand's 10-year government bond climbed 14 basis points to 4.8720%, and yields on Japan's 10-year sovereign securities were 5.5 basis points higher at 2.315%. Bond prices move inversely to yields.
Higher government bond yields also pressured precious metals such as gold on Monday. Spot gold fell 2.0% to $4,400.76 a troy ounce.
"Rising inflation expectations have pushed yields higher, reducing the appeal of non-yielding assets" including gold, Saxo Bank's Ole Hansen said in an email. "A stronger dollar and fading rate-cut expectations have added further pressure," the head of commodity strategy added.
Meanwhile, front-month West Texas Intermediate crude oil futures edged 0.1% higher to $98.29 a barrel, while front-month Brent crude oil futures were 0.5% lower at $111.63 a barrel.
Write to Ronnie Harui at ronnie.harui@wsj.com
(END) Dow Jones Newswires
March 22, 2026 21:56 ET (01:56 GMT)
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