Asian stocks extended their losses on Tuesday as rising tensions between the United States and Iran drove oil prices toward one-month highs.
The renewed surge in energy prices raised concerns that inflation could remain elevated for longer. It also created fresh uncertainty around the outlook for global interest rates.
Meanwhile, investors turned their attention to the latest US Consumer Price Index report, due later in the day.
US stock futures also moved slightly lower during Asian trading. The decline followed a sharp sell-off on Wall Street in the previous session.
Oil Prices Surge as Supply Fears Intensify
Oil prices continued to climb after gaining around 10% on Monday.
The rally accelerated after US President Donald Trump said Washington would restore a blockade on Iranian shipping. He also announced a proposed 20% charge on cargo moving through the Strait of Hormuz.
At the same time, renewed US military strikes against Iran increased concerns about possible disruptions to global oil supplies.
The Strait of Hormuz is a critical route for international crude shipments. Therefore, any restrictions or military escalation in the region could have a significant effect on energy markets.
Higher Oil Prices Renew Inflation Concerns
The sharp increase in oil prices revived fears that inflation could remain above central bank targets.
Higher energy costs can raise transportation, manufacturing and consumer prices. As a result, traders reduced their expectations for near-term interest rate cuts.
Markets also increased bets that the Federal Reserve could raise interest rates later in July.
Those expectations strengthened after hawkish comments from Federal Reserve Governor Christopher Waller. Futures markets subsequently indicated a higher probability of a July rate increase.
South Korean Stocks Lead Regional Losses
South Korea’s KOSPI fell 2.5%, extending the steep decline recorded during the previous session.
Semiconductor stocks remained especially volatile after the US-listed shares of SK Hynix dropped sharply overnight.
Japan’s Nikkei 225 declined around 1%. However, the broader TOPIX index remained largely unchanged.
Chinese Markets Steady After Strong Trade Data
Mainland Chinese markets performed better than most regional indexes.
The Shanghai Composite traded close to unchanged levels, while the blue-chip CSI 300 gained approximately 0.5%. Hong Kong’s Hang Seng Index also remained relatively muted.
Official data showed that China’s exports and imports grew much faster than economists had expected in June.
Strong global demand for artificial intelligence products and other technology-related goods helped offset growing geopolitical pressures.
Australia and Singapore Markets Move Lower
Australia’s S&P/ASX 200 declined by around 0.5%.
Singapore’s Straits Times Index fell approximately 1%, while futures linked to India’s Nifty 50 remained broadly stable.
The mixed performance reflected continued caution across Asian markets as investors assessed the economic impact of higher oil prices.
US CPI Data Takes Centre Stage
Investors are now closely watching the latest US consumer inflation report.
The CPI figures could provide fresh evidence about the direction of inflation and influence expectations for the Federal Reserve’s next policy decision.
A stronger-than-expected inflation reading could reinforce concerns that interest rates will remain high or rise further. In contrast, weaker inflation data could ease pressure on financial markets and support expectations for a more accommodative policy outlook.
