Asia stocks wipe out 2026 gains as Iran war drives inflation worries
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In early trading on March 31, Japan’s Nikkei index was down 1.7 per cent while South Korea’s Kospi sank 3.7 per cent.
PHOTO: EPA
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MUMBAI - Stock markets in Asia fell on March 31, with the key regional benchmark erasing its gain for 2026, as soaring energy costs due to the Iran war raise concerns of inflation and slower growth.
The MSCI Asia Pacific Index dropped 1.1 per cent, set for a drop in March of 13 per cent, which would be the worst month since October 2008. MSCI’s emerging market gauge also wiped out its advance for the year.
The milestone highlights the sharp turn of fortune for the Asian market, which had started 2026 on a tear as investors piled into the region’s artificial intelligence infrastructure stocks.
But the war in the Middle East, now in its fifth week, shows little sign of easing.
“The market has been treated to a further barrage of geopolitical headline risk, and this will only remain the case for the days and possibly weeks ahead,” wrote Mr Chris Weston, the head of research at Pepperstone Group in Melbourne. “There remains increased scepticism around a near-term ceasefire.”
The MSCI Asia gauge climbed 15 per cent from the start of 2026 to its record high on Feb 27, far outpacing global equities. The gain has evaporated as an outlook for tighter monetary policy and crimped supply of key materials drives a rethink of the growth thesis.
Asian economies, including South Korea, Japan and India, are especially vulnerable to oil shocks given their heavy reliance on Middle East countries for imported energy. That has traders worrying about the negative impacts of higher costs on corporate profits and higher interest rates to tame inflation.
South Korea’s Kospi index led losses in Asia on March 31, sinking 3.7 per cent while Japan’s Nikkei index fell 1.7 per cent.
Oil pushed higher on March 31 after Iran attacked another tanker in the Persian Gulf and US President Donald Trump issued threats against the country’s civilian infrastructure as hostilities in the Middle East continue to escalate.
West Texas Intermediate rose as much as 3.7 per cent to US$106.70 a barrel after closing at the highest since July 2022 on March 30.
Iran attacked a fully-laden Kuwaiti crude carrier in Dubai Port, causing a fire and potential oil spill in surrounding waters, according to Kuwait Petroleum. Tehran has targeted ships across the Gulf since the war began, and previously hit two vessels near Iraq.
On March 30, Mr Trump said that the US will blow up electricity plants, oil facilities and “possibly” desalination infrastructure if Iran does not reopen the Strait of Hormuz. He made the remarks in a social media post.
The war has effectively closed the crucial waterway to shipping, choking off supplies of crude, natural gas and products such as diesel from global markets, leading to surging energy prices and concerns about an inflation crisis. Despite Mr Trump regularly saying a deal with Iran is imminent, the US has sent more troops to the region as the conflict extends into its fifth week.
The US oil benchmark has surged by almost 60 per cent this month, the most since May 2020, while Brent crude futures are heading for the biggest monthly advance on record.
The US national average retail price of gasoline crossed US$4 a gallon for the first time in more than three years on March 30, data from price-tracking service GasBuddy showed. BLOOMBERG, REUTERS
