Asian financial markets came under heavy pressure on Wednesday as renewed US airstrikes on Iran intensified fears of further disruption to the global energy supply. Rising oil prices and a sharp increase in US government bond yields revived concerns over inflation and the possibility of higher interest rates, triggering a broad selloff across equities and bonds.


MSCI’s broadest index of Asia Pacific shares outside Japan fell 2%. South Korea’s KOSPI dropped nearly 4%, while Japan’s Nikkei 225 declined 2.9%.

The weakness followed losses on Wall Street, where the S&P 500 fell 0.7% and the Nasdaq Composite lost 1%. Higher government bond yields weighed particularly heavily on technology stocks, which are sensitive to rising borrowing costs.

Oil Prices Surge on Iran Escalation
Brent crude rose 0.9% to around $95.45 a barrel, extending gains after reaching a five week high following US airstrikes on Iran.

The main concern for markets is the potential for further disruption around the Strait of Hormuz, a critical energy corridor through which a significant share of global oil and liquefied natural gas shipments normally passes.

Any prolonged disruption could push energy prices significantly higher and increase costs for businesses and consumers worldwide.

Bond Yields Reach Multi Year Highs
The energy shock has also accelerated a global bond selloff.

The US 10 year Treasury yield reached 4.8122%, its highest level in almost three years. Japan’s 10 year government bond yield also rose to around 3%, extending its recent climb.

Higher yields increase borrowing costs across economies and can put pressure on stock valuations, currencies and government finances.