Asian Stock Selloff Builds to Third Day, Oil Gains: Markets Wrap
(Bloomberg) — Asian stocks tumbled for a third straight day as investors grappled with mounting uncertainty over the duration of the Middle East conflict and inflationary pressures, damping appetite for risk.
The MSCI Asia Pacific Index slumped as much as 3.2%, with South Korean shares poised for a correction. The Asian moves snapped the rebound in the US markets after President Donald Trump’s assurances on safeguarding shipping through the Strait of Hormuz helped calm nerves. Brent crude traded close to $82 a barrel.
Elsewhere, Treasuries held their gains with the yield on the 10-year holding at 4.06%. Traders have pared bets for interest-rate cuts by the Federal Reserve amid concerns the war will unleash a wave of inflation. Gold rebounded from Tuesday’s slump and the dollar continued to be the haven of choice, strengthening for a third day.
The US-Israeli attack on Iran has destabilized the Middle East and threatens to deliver a new inflationary shock to the global economy by pushing up oil prices. There’s also no clear sense of when or how the war will end, raising the prospect of a prolonged conflict and unforeseen consequences beyond the White House’s control.
“The risk here is the scale of the supply shock the war will create,” wrote Kyle Rodda at Capital.com. “Given the very chaotic nature of the events and the strong incentive for all combatants to escalate right now, this uncertainty could drag on for a while.”
The war continued to reverberate across the Middle East, with Israel bombarding Tehran in a fresh wave of strikes. The Islamic Republic fired missiles at Qatar, Bahrain and Oman, with Doha saying targets weren’t limited to military interests. Qatar and Iraq halted production at major energy sites.
This conflict is different from Trump’s trade war, his talk of invading Greenland or his assault on the Fed’s independence, all of which unnerved investors globally.
In each case, traders came to expect that Trump would backtrack if markets fell too far, a strategy that came to be known as the TACO trade, which stands for Trump Always Chickens Out — and created a buy-the-dip mentality that allowed stocks to rally back.
“For now, markets are trading headline to headline,” said Fawad Razaqzada at Forex.com. “Much will depend on whether tensions stabilize — or whether this proves to be the start of a more prolonged disruption to global supply.”
What Bloomberg strategists say…
Asian equities are seeing another wave of selling as the Taiex slumps in early trading, which is spreading across to fuel more Kospi weakness along with Hong Kong stocks. It is early in the session but already this is shaping up to be a very ugly day of risk aversion for Asia.
— Mark Cranfield, MLIV. For full analysis, click here.
Markets are focused on oil as traders weighed Trump’s plan to insure and escort tankers passing through the Strait of Hormuz, with traffic in the vital waterway all but halted. Oil extended gains with Brent hovering around $82 a barrel after rallying about 12% over two days, the biggest gain since 2020.
“When considered alongside other headlines, it’s questionable whether that alone is enough to reassure markets,” Hitoshi Asaoka, chief strategist at Asset Management One, said about Trump’s comments. “There are reports that drone attacks have halted production and refining facilities not only in Iran but in other countries as well. So it’s unclear whether simply being able to pass through the strait is sufficient cause for reassurance.”
Attention is also on South Korea. The Kospi index slumped 6.2%, extending a 7.2% plunge on Tuesday, which was the worst session since August 2024. The South Korean won climbed on Wednesday after sliding to its weakest level since 2009 in the prior session.
Oil’s advance and the dollar’s strength are a combination that’s not ideal for Asian economies. The dollar’s two-day gain is the most in nearly a year. A gauge of Asian currencies fell to the lowest since January this week, with the decline limited as China sought to anchor the yuan.
Even after the losses this week, Asian stocks are up about 7% this year, after gaining more than 25% last year. Stocks have rallied since their slump in April — caused by Trump’s tariffs announcement — on bets the billions spent by companies on AI will pay off.
“There is significant room for global market corrections to continue, as risk has been built up over the last three years of global growth,” according to Bob Savage, head of markets macro strategy at BNY.
Some of the main moves in markets:
Stocks
S&P 500 futures fell 0.3% as of 10:56 a.m. Tokyo time Japan’s Topix fell 3.4% Australia’s S&P/ASX 200 fell 1.9% Hong Kong’s Hang Seng fell 1.8% The Shanghai Composite fell 1.1% Euro Stoxx 50 futures rose 0.4% Currencies
The Bloomberg Dollar Spot Index rose 0.1% The euro fell 0.2% to $1.1594 The Japanese yen rose 0.1% to 157.58 per dollar The offshore yuan was little changed at 6.9239 per dollar Cryptocurrencies
Bitcoin rose 0.7% to $68,479.6 Ether rose 0.8% to $1,985.07 Bonds
The yield on 10-year Treasuries was little changed at 4.06% Japan’s 10-year yield declined three basis points to 2.100% Australia’s 10-year yield declined three basis points to 4.74% Commodities
West Texas Intermediate crude rose 0.1% to $74.66 a barrel Spot gold rose 1.6% to $5,171.34 an ounce This story was produced with the assistance of Bloomberg Automation.
–With assistance from Matthew Burgess, Carter Johnson and Karl Lester M. Yap.
©2026 Bloomberg L.P.
