Heightened tensions in the Middle East have amplified market anxieties over rising oil prices and bolstered risk-off sentiment. During Monday's (23rd) Asia-Pacific trading session, as the Middle East situation further dampened investor confidence, assets from major Asia-Pacific stock indices to cryptocurrencies and gold re-entered a persistent decline pattern. Brent crude futures continued to fall, reaching $111.97 per barrel. WTI crude futures dropped 0.6% to $97.64 per barrel. The spread between the two benchmarks exceeded $14 per barrel, marking the widest gap in years. Chris Verrone, Chief Market Strategist at Strategas Research, suggested that the expanding spread might signal that "this oil crisis has peaked." He added that elevated Brent prices could prompt traders to factor in a prolonged duration for the conflict. Jurrien Timmer, Director of Global Macro at Fidelity, commented on a social media platform: "What does all this mean? Why are risk assets falling and the US dollar in demand, while bond yields and Bitcoin prices are rising? Too many questions."

Japanese and South Korean stock markets fell over 5%. Today, the Nikkei 225 index dropped as much as 5% to 50,688.76 points; the Topix index fell up to 4.5% to 3,447.34 points, entering a technical correction. Electronics and banking sectors contributed most to the Topix's decline, with chip-related companies like Renesas Electronics and Lasertec experiencing the largest drops. Amir Anvarzadeh, Japanese Equity Strategist at Asymmetric Advisors, wrote in a report that regardless of subsequent events, the short-term inflation outlook has become very clear. He noted that the 48-hour ultimatum issued by US President Trump to Iran demanding the reopening of the Strait of Hormuz undoubtedly "intensified tensions," making further escalation more likely. He anticipates that "overvalued" AI-related stocks, such as cable manufacturer Fujikura Ltd., will be significantly impacted by inflation concerns. Fujikura's shares fell up to 6.7% on Monday. Kazuyuki Muramatsu, Investment Management Director at Nagomi Capital, stated that rising Japanese government bond (JGB) yields further exacerbated cautious sentiment in the stock market. On Monday, the yield on the 10-year JGB rose 6 basis points to 2.32%, nearing its highest level since 1999. "The market perceives the yield increase as 'negative'," Muramatsu said, "Therefore, even for bank stocks, which typically benefit from rising yields, this is a bearish factor." Major South Korean stock indices also fell approximately 5%. The KOSPI Composite index plummeted over 6%, and the KOSDAQ index declined nearly 5%. Australia's S&P/ASX 200 index fell more than 1.8% during early Asian trading. Bank of America indicated that the recent sell-off in the Nikkei 225 might signal a short-term bottom, as volatility has spiked significantly—a pattern historically associated with market troughs. However, whether this translates into a sustained recovery depends on how quickly macroeconomic uncertainties subside. A key trigger for a rebound could be stabilization in energy markets. Rising gasoline prices, especially with the approaching US summer driving season, could influence policy responses and investor sentiment. If energy costs continue to climb due to supply disruptions related to the Strait of Hormuz, pressure on global markets may persist. "As a non-resource-based economy, Japan remains particularly vulnerable. A prolonged disruption in the Strait of Hormuz would affect not just oil flows but also a broader range of commodities including liquefied natural gas, coal, and industrial metals, thereby raising input costs across sectors," the bank stated. "If geopolitical tensions ease in the coming weeks, Japanese equities could resume their long-term uptrend, supported by solid corporate fundamentals, stable earnings estimate revisions, and continued participation from foreign investors. However, failure to resolve tensions could lead to renewed volatility and potentially push the market below recent lows."

US stock futures showed little change. Dow Jones Industrial Average futures were flat, S&P 500 futures declined 0.1%, and Nasdaq Composite futures fell 0.2%. All three major indices ended lower last week, with the S&P 500 dropping over 1.5% and falling below its 200-day moving average for the first time since May. The Dow Jones recorded its first consecutive four-week decline since 2023, while the Nasdaq also fell about 2% over the same period. Investors in US stocks are still hoping for a shift in the Trump administration's hardline stance towards Iran, anticipating a revival of the so-called "Trump (TACO) deal." Craig Shapiro, Senior Macro Strategist at NinjaTrader, stated, "The market is pricing in 'TACO', viewing it as almost certain and imminent." He added that the S&P 500's historical "pain threshold," a 10% correction from its peak, has not yet been triggered. Since the escalation of the conflict, the S&P 500 has fallen over 5%, but underlying factors continue to support the index.

Traditional safe-haven assets like US Treasuries and gold also faced declines. Typically during geopolitical tensions, investors flock to gold as a safe haven, driving up its price. This time, however, gold, long considered a prime safe-haven asset, has not been spared from the conflict's impact. According to Dow Jones Market Data, last week, the front-month gold futures contract fell $486.80 per ounce, or 9.6%, to $4,574.90, marking its worst weekly performance in 14 years. During Monday's Asia-Pacific trading, spot gold continued to decline, down 1.7% to around $4,413 per ounce, while gold futures also fell 3.5% to $4,448.46 per ounce. Other precious metals weakened on Monday. Spot silver dropped 0.4% to near $67 per ounce, and spot platinum declined 0.6% to $1,913.57 per ounce. The other safe-haven asset, US Treasuries, followed a similar pattern. The yield on the 10-year US Treasury note has risen to 4.39%, showing a significant increase from the beginning of the month. Mark Hackett, Chief Market Strategist at Nationwide Investment Management Group, noted that investors are not flocking to US Treasuries for safety as usual. Instead, the movement in yields suggests growing investor nervousness about inflationary impacts and the rising US debt burden. It also indicates market concern that the Federal Reserve might have to raise interest rates to curb a new wave of inflation if rising oil prices start pushing up consumer goods prices. Gold's performance has been particularly puzzling for investors. Fawad Razaqzada, Market Analyst at StoneX, said, "The underlying reason might be that the strengthening US dollar and Treasury yields are exerting more downward pressure on gold prices than the support from safe-haven flows. Even if gold ultimately proves resilient, the immediate shock from soaring oil prices is simply too powerful for even gold to ignore." Historically, gold has performed well during periods of geopolitical conflict. However, Razaqzada emphasized, "Similar to the situation with US Treasuries, investors are currently grappling with the possibility that if the conflict persists, central banks may be forced to hike rates to combat oil-driven inflation, which could undermine gold's strength relative to currencies like the US Dollar Index." Last week, both the European Central Bank and the Bank of England hinted at potential rate hikes this year. The Federal Reserve has not sent clear signals, but markets are gradually scaling back expectations for rate cuts within the year. Most importantly, analysts believe gold investors find it difficult to overlook the metal's substantial price appreciation over the past year. Gold prices rose over 60% in 2025, and the rally continued into early 2026. Liz Thomas, Head of Investment Strategy at SoFi, stated, "From late last year into early this year, gold started behaving more like a speculative asset. The current situation is akin to all previously top-performing assets being punished for their past excellence. Once fear sets in, investors begin selling those assets that had strong performance, and gold falls into that category."