Asian stocks retreated and oil prices surged Monday as President Donald Trump intensified his rhetoric on Iran, warning on social media that “the Clock is Ticking” for negotiations to end the months-long war. The sell-off in Tokyo, Hong Kong and Sydney, coupled with a spike in crude prices, underscored how the stalled conflict and the near-closure of the Strait of Hormuz are rippling through global markets.
Trump’s post, issued after a call with Israeli Prime Minister Benjamin Netanyahu, said Iran “better get moving, FAST, or there won’t be anything left of them.” The warning came days after a widely watched summit between Trump and Chinese President Xi Jinping in Beijing failed to produce a tangible path to reopening the key oil transit route, despite the White House saying both sides agreed the strait must remain open.
The Strait of Hormuz, through which roughly a fifth of the world’s oil flows, has been mostly closed since the U.S. imposed its own sea blockade on Iranian ports in April. The blockade, layered atop Iran’s earlier mining and military operations, has sent energy prices climbing and left the global economy on edge.
Brent crude, the international benchmark, rose 1.9% to $111.31 a barrel. U.S. benchmark crude gained 2.3% to $107.83 a barrel. Before the war began in late February, Brent was trading at roughly $70.
In equity markets, Tokyo’s Nikkei 225 fell 0.9% to 60,843.09, extending a pullback from its all-time intraday high reached last week above 63,000. Hong Kong’s Hang Seng slid 1.6%, while Australia’s S&P/ASX 200 lost 1.4%. The Shanghai Composite edged 0.1% lower after China reported weaker-than-expected retail sales for April.
The surge in energy costs also pushed up long-term interest rates. The yield on the U.S. 10-year Treasury rose to around 4.63%, up from roughly 4% before the war. In Japan, the 10-year government bond yield hit 2.8%, its highest since the late 1990s, as the Bank of Japan adjusts rates and higher energy costs stoke inflation expectations.
“Re-escalation risks are increasing,” ING commodities strategists Warren Patterson and Ewa Manthey wrote in a research note. While there had been a pick-up in shipping activity around the strait over the past week, they cautioned, “this can change quickly.”
A drone strike over the weekend on a nuclear power plant in the United Arab Emirates underlined the threat of the war widening beyond the immediate vicinity of the Gulf. The UAE has not attributed the strike, but the attack fanned fears of a broader regional conflict that could disrupt energy infrastructure far from the strait.
Trump’s warning marked the latest in a series of deadlines he has set and then stepped back from, leaving investors on edge. The lack of concrete results from last week’s Beijing summit, where Trump said Xi had told him China “would like to be of help,” has left markets skeptical that a diplomatic off-ramp is near.
U.S. futures were down more than 0.6% in early Asia-Pacific trading, pointing to further losses on Wall Street after the S&P 500 fell 1.2% on Friday. The Dow Jones Industrial Average lost 1.1% and the technology-heavy Nasdaq composite dropped 1.5%.