Asia Markets Sink on Trump Threat; IEA Warns of Worst Ever Crisis

Oil prices rose as Asian markets tumbled again on Monday as tensions between the United States and Iran escalated over threats from Donald Trump.

On Saturday, the US president said Iran has 48 hours to reopen the Strait of Hormuz or face destruction of its energy infrastructure. Israel also said the war in the Middle East could continue for weeks.

Trump’s ultimatum came a day after the US leader said he was considering “winding down” the military campaign, which comes as the waterway, which accounts for 20% of global oil and gas flows, has been largely closed, with only a handful of tankers allowed to transit to “friendly countries”.

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Trump wrote on Truth Social that if Tehran did not fully reopen the strait within 48 hours (23:44 GMT on Monday, according to the time of his post), the United States would “strike and destroy” Iranian power plants – “starting with the largest ones first.”

This led to the Iranian leader warning that the strait “will be completely closed” if the United States acted on his threats.

IEA energy crisis warning

As the conflict enters its fourth week with no end in sight, the head of the International Energy Agency warns Worst global energy crisis in decades He also stated that the world economy is under “significant threat” from it.

Speaking in Australia on Monday, IEA President Fatih Birol said: “The global economy faces a major threat today and I very much hope that this issue can be resolved as soon as possible.

“If trends continue in this direction, no country will be immune to the consequences of this crisis. A global effort is therefore needed.”

Birol said the world was losing more oil every day than the combined effects of the oil crisis and Russia’s invasion of Ukraine in the 1970s.

His comments come as central banks reconsider monetary policy amid expectations that soaring oil prices will lead to a spike in inflation. The Reserve Bank of Australia raised interest rates last week.

Blockades in the Persian Gulf and Strait of Hormuz could also block fertilizer shipments to countries in the Asia-Pacific region, analysts said, adding to concerns about global food security.

Iranian parliament speaker Mohammad Bagher Ghalibaf has threatened to destroy vital infrastructure in the region, saying if Tehran’s own infrastructure were hit, it would lead to a “long-term” rise in oil prices.

Speculations on the U.S. Army

Iranian media reported explosions in Tehran on Monday, Israel announced another wave of attacks, while Saudi Arabia and the United Arab Emirates reported facing new attacks.

The latest escalation comes as the Israeli military said it would expand ground operations in Lebanon targeting the Iran-backed militant group Hezbollah, while a spokesman said the country faced “several weeks” of fighting with Iran and Hezbollah.

There has also been speculation about what the United States plans to do with the 2,500 combat troops heading to the region, with some suggesting they may plan to seize Iran’s largest oil export terminal.

“Military analysts say the United States may plan to seize kharg islandAn area of approximately 21 square kilometers (8 square miles) of land containing Iran’s main oil export terminal. Doing so could theoretically cut off the country’s oil shipments, depriving it of much-needed revenue and forcing it to make greater concessions to the Americans in exchange for an end to hostilities. ” BBC report on Sunday.

Major Asian markets tumble

With news like this, it’s no surprise that stocks started to fall on Monday, with Seoul and Tokyo down 6.5% and 3.5% respectively. These were already high performers before the war began.

Hong Kong and Shanghai fell by more than 3%, while Singapore, Taipei, Mumbai, Bangkok and Manila all fell between 2-3%. Sydney closed down 0.74%, while Wellington also fell into negative territory.

London, Paris and Frankfurt also opened sharply lower.

The won fell to 1,510 won per dollar, its lowest level since 2009.

Oil prices rose more than 2%, with Brent crude above $114 and West Texas Intermediate crude above $101.

‘Significant impact’

“The results and Trump’s next moves, especially if things escalate, will have a significant impact on markets for the rest of the week and at the end of the month and quarter,” Pepperstone’s Chris Weston wrote.

He added that while the president has often stepped back on issues in the past, Trump “has also shown credibility in taking military action when demands are not met, so markets will focus on his weekend posts on The Truth Society.”

“If we exceed that deadline, the focus will quickly turn to the scale of any action against Iran and the nature of Iran’s response, particularly against U.S. bases and its allies.”

The prospect of rising borrowing costs has hit non-yielding gold, which has fallen for eight straight days and just suffered its worst weekly loss since 1983.

Gold was trading at about $4,350 on Monday, having hit a record high of nearly $5,600 in late January.