Key Points
- Japan’s Nikkei 225 fell 1.6%, while South Korea’s Kospi dropped over 2%.
- Hong Kong’s Hang Seng slipped 0.33%, while China’s CSI 300 fell 0.66%.
- Indian markets remained closed for the Ganesh Chaturthi holiday.
ISLAMABAD: Asian stocks came under renewed selling pressure on Monday as a sharp rise in oil prices intensified concerns about inflation, economic growth and interest rates, with investors also watching escalating tensions in the Middle East.
Japan’s Nikkei 225 fell 1.6 per cent to 62,977.54 in early trading, with technology and metals stocks among the biggest decliners. South Korea’s Kospi was down more than 2 per cent, extending losses after a 2.1 per cent decline in the previous session.
In Hong Kong, the Hang Seng Index fell 0.33 per cent, while mainland China’s CSI 300 index, which tracks major companies listed in Shanghai and Shenzhen, declined 0.66 per cent. Technology and basic-material companies led the declines in Hong Kong.
Australia’s S&P/ASX 200 was broadly flat around 8,750 points, although mining giant BHP fell about 1.3 per cent as investors assessed the impact of higher energy prices and renewed inflation risks.
Indian markets were closed on Monday for the Ganesh Chaturthi holiday, leaving the country’s benchmark Sensex and Nifty 50 indexes unavailable for comparison with other major Asian markets.
The latest pressure on Asian stocks primarily came from oil. Brent crude rose to around $107.5 a barrel after attacks on Saudi oil infrastructure and renewed threats to shipping routes in the region. US West Texas Intermediate crude was above $102 a barrel.
Higher oil prices are important for Asia because many of the region’s largest economies, including Japan, South Korea, India and China, are major energy importers.
More expensive crude raises transport and manufacturing costs and can feed into consumer inflation, potentially making central banks more reluctant to cut interest rates.
Stocks enter critical week
Stocks are also entering a critical week for monetary policy. The US Federal Reserve is expected to announce its interest-rate decision on Wednesday, while the Bank of Japan is also due to meet.
Investors have sharply increased bets on a US rate increase after stronger-than-expected inflation data, while Japan is also expected to consider another rate increase.
The combination of the higher oil prices and tighter monetary policy creates a difficult environment for stocks.
Higher borrowing costs can reduce corporate investment and consumer demand, while expensive energy can squeeze company profit margins; both directly impact stocks.
The Japanese yen, however, strengthened slightly against the dollar on Monday and has risen about 4 per cent this month as investors anticipate further Bank of Japan policy tightening. A stronger yen can ease Japan’s import costs, although it can also reduce the value of overseas earnings for Japanese exporters.
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The latest market moves mark a sharp reversal from the stronger performance seen in parts of Asia earlier this month, when chipmakers helped lift Japan and South Korea.
The renewed oil shock has shifted investor attention from artificial-intelligence and technology gains towards inflation, energy security and central-bank policy.
For global investors, the key question is whether the rise in oil prices bv remains a short-lived geopolitical shock or becomes a sustained supply disruption.
A prolonged increase would raise the risk of slower economic growth alongside persistent inflation, placing further pressure on stock markets and central banks.
