Asian stock markets mostly fell on Monday while oil prices surged after US President Donald Trump warned that “the clock is ticking” for Iran as efforts to reach a lasting agreement to end the conflict remain stalled.
US stock futures also moved lower, with major indexes losing more than 0.6 percent.
Japan and South Korea pulled back further after recent record highs.
Japan’s Nikkei 225 dropped 0.9 percent to 60,843.09, led by losses in technology shares. The index had touched a record intraday high above 63,000 last week.
The yield on Japan’s 10-year government bond rose to 2.8 percent, its highest level since the late 1990s, as the Bank of Japan gradually raises interest rates and higher energy prices fuel inflation concerns.
In South Korea, the Kospi gained 0.9 percent to 7,558.50 after recovering from earlier losses. The index had crossed 8,000 on Friday, driven by strong demand for technology stocks linked to the artificial intelligence boom, before easing on profit-taking.
Hong Kong’s Hang Seng Index fell 1.6 percent to 25,543.32, while China’s Shanghai Composite slipped 0.1 percent to 4,132.24 after weaker-than-expected retail sales data for April.
Australia’s S&P/ASX 200 lost 1.4 percent to 8,508.40. Taiwan’s Taiex declined 1.1 percent, and India’s Sensex was down 0.6 percent.
Oil prices climbed sharply after Trump said in a social media post that Iran should act quickly or “there won’t be anything left of them,” following a phone call with Israeli Prime Minister Benjamin Netanyahu.
Investors remain cautious because of uncertainty over the Strait of Hormuz, a key route for global oil and gas shipments. The waterway remains largely closed, while the US has maintained a maritime blockade on Iranian ports since last month.
Tensions increased further after a weekend drone attack on a nuclear power plant in the United Arab Emirates.
Brent crude, the international benchmark, rose 1.9 percent to $111.31 per barrel. US benchmark crude gained 2.3 percent to $107.83 per barrel. Oil had been trading near $70 a barrel in late February before the conflict began.
Analysts at ING Group said the risk of renewed escalation is increasing, despite some improvement in shipping activity around the Strait of Hormuz.
The oil market is also reacting to the lack of progress following last week’s summit in Beijing between Trump and Chinese President Xi Jinping.
The White House said both countries agreed that the Strait of Hormuz must remain open. Washington had hoped Beijing could use its close economic ties with Tehran to help broker a peace deal.
In the bond market, the yield on the US 10-year Treasury note rose to about 4.63 percent, up from 4.47 percent last Thursday and nearly 4 percent before the conflict began.
On Friday, the benchmark S&P 500 fell 1.2 percent from the record high it set a day earlier. The Dow Jones Industrial Average dropped 1.1 percent, while the Nasdaq Composite lost 1.5 percent.
In currency trading, the US dollar rose to 159.02 Japanese yen from 158.62 yen. The euro edged up to $1.1626 from $1.1622.