Asian share markets declined Monday as soaring oil prices fueled inflation concerns and the specter of higher interest rates globally. The U.S. dollar saw increased demand as investors sought liquidity.
Brent crude jumped 17% to $108.77 a barrel, with U.S. crude rising 18% to $107.56, signaling a sharp increase in gasoline prices. This surge is driven by ongoing hostilities in the Middle East and the risk of disrupted oil tanker routes through the Strait of Hormuz.
Economists warn that sustained higher energy costs could slow global economic growth by 0.6% and raise consumer prices by 1% annually. A broader conflict could push oil prices above $120 a barrel, potentially triggering a global recession.
Major Asian markets experienced significant drops, with Japan's Nikkei down 6.2% and South Korea's market falling 7.3%. Wall Street futures also slid, with S&P 500 futures down 1.8% and Nasdaq futures off 2.1%.
In bond markets, rising inflation fears pushed 10-year Treasury yields up to 4.189%. Investors are concerned that persistent inflation will complicate the Federal Reserve's ability to ease monetary policy. Upcoming U.S. consumer price data is expected to show inflation holding at 2.4% in February.
Central banks in Europe and the UK are also facing pressure. Markets now anticipate potential interest rate hikes from the European Central Bank as early as June, and a reduced likelihood of rate cuts from the Bank of England.
The dollar strengthened against major currencies, rising 0.4% to 158.45 yen and pushing the euro down 0.8% to $1.1520. The Australian dollar fell 0.9% to $0.6964. Gold prices declined 2.4% to $5,047 an ounce, as investors reportedly cashed in on metal gains to cover losses elsewhere.