Asia stocks slump as oil prices head for biggest monthly rise ever

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SYDNEY – Stock markets slumped in Asia on March 30 as investors dug in for a protracted Gulf conflict that already has oil prices heading for a record monthly rise, bringing a spike in inflation and the risk of recession to much of the globe.

As the conflict moved into its fifth week, Yemen’s Iran-aligned Houthis on March 28 launched their first attacks on Israel since the start of the Iran war, marking an escalation in the conflict.

While the Houthis did not say they would target vessels transiting through the southern Red Sea and the Bab el-Mandeb Strait, they have the capability to do so.

The Saudi Arabian port of Yanbu, which the kingdom is using for some of its oil exports after the crucial Strait of Hormuz was effectively closed by the war, is also well within the range of Houthi missiles.

The threat from the Houthis to “Saudi oil infrastructure and exports through the Red Sea outlet is like denying bypass surgery that worked well to arrest the full heart attack” of the Strait of Hormuz closure, said XAnalysts chief executive Mukesh Sahdev.

The news sent the price of crude oil surging more than 3 per cent at one point, with Brent crude hitting close to US$117 a barrel before easing back.

Brent was up 2.2 per cent at US$115.05 at 5.12pm Singapore time on March 30, while US West Texas Intermediate climbed 1.6 per cent to US$101.21.

Brent has soared about 60 per cent in March, the steepest monthly jump in data going back to 1988 and exceeding gains made during the 1990 Gulf War.

Adding to the dour mood were US President Donald Trump’s remarks to the Financial Times (FT) that he wanted to “take the oil in Iran” and could seize Kharg Island in the Persian Gulf “very easily”.

Kharg Island, located off the west coast of Iran, is a vital oil terminal for the country and is being eyed by the Pentagon for ground operations, though the US insisted it would stop short of a full-scale invasion.

“Maybe we take Kharg Island, maybe we don’t. We have a lot of options,” Mr Trump told the FT. “It would also mean we have to be there for a while.”

While Pakistan said on March 29 it was preparing to host “meaningful talks” between Washington and Tehran to end the war, Iran’s Parliament Speaker Mohammad Bagher Ghalibaf said the US was “secretly planning a ground attack”.

“The longer the (Hormuz) strait remains closed, the sharper the drawdown in buffer supplies that could spark dramatic increases in the price of crude oil, natural gas and other commodities,” said JPMorgan’s global head of economics Bruce Kasman.

“A scenario in which the strait remains closed for an additional month would be consistent with oil prices rising towards US$150 per barrel and constraints on industrial consumers of energy supply.”

This is bad news for Asia as much of the region is highly dependent on energy from the Middle East.

Paring losses, Japan’s Nikkei closed down 2.8 per cent while Hong Kong’s Hang Seng Index fell 0.8 per cent.

South Korea’s Kospi index lost 3 per cent. The country’s financial regulator said on March 30 that South Korea will actively utilise market stabilising programmes of 100 trillion won (S$85 billion) and expand them if needed.

The Financial Services Commission will also consider increasing financial support for companies hit by high oil prices if the Middle East conflict drags on, its chairman Lee Eog-weon said.

Singapore’s Straits Times Index avoided big losses and closed down just 0.02 per cent.

US Fed now expected to hike rates

The inflationary threat has led investors to revise up the outlook for interest rates almost everywhere. Markets now imply 12 basis points of tightening by the US Federal Reserve in 2026, compared with 50 basis points of cuts a month ago.

In the European Union, figures on March 31 are forecast to show that annual inflation leaped to 2.7 per cent in March from 1.9 per cent the month before, though core prices should be steadier.

Heightened volatility in markets has tended to benefit the US dollar as the world’s most liquid currency. The United States is also a net energy exporter, giving it a relative advantage over Europe and much of Asia.

The US dollar was holding at 160.12 yen, having last week crossed the 160 barrier for the first time since July 2024, when Japan last intervened to prop up its currency. The euro was stuck at US$1.15, not far from the March trough of US$1.1409.

In commodity markets, gold was down 1 per cent at US$4,445 an ounce, having drawn scant support as a safe haven or as a hedge against inflation risks. REUTERS, AFP