One-fifth of the world's oil supply hangs in the balance as the U.S. and Iran exchange fire over the Strait of Hormuz. The renewed hostilities have sent crude prices climbing past $90 a barrel, triggering a sharp selloff in Asian government bonds and equities fueled by fears of stubborn inflation.
President Trump confirmed that U.S. strikes were launched in retaliation for alleged Iranian mine-laying operations and threats against American personnel. Tehran responded with a barrage of missiles and drones across the Persian Gulf, drawing neighboring nations into the fray. Jordan’s armed forces reported intercepting 13 ballistic missiles within their airspace, while Kuwait and Bahrain also confirmed coming under fire.
Despite the volatility, Trump signaled he has no immediate interest in reopening negotiations with Tehran. On Truth Social, he expressed satisfaction with the current tactical position, noting that the U.S. maintains near-total control of the waterway while Iran’s economy faces internal collapse. Analysts at Commerzbank warned that this escalation effectively nullifies recent diplomatic optimism, raising the probability of a sustained energy supply crisis.
Energy markets reacted immediately. West Texas Intermediate futures climbed 0.4% to $90.58, and Brent crude rose 0.7% to $95.31. This surge has exacerbated existing inflationary pressures, a sentiment sharpened by Federal Reserve Chairman Kevin Warsh’s recent hawkish commentary. Consequently, yields on Japanese 10-year bonds touched a three-decade high of 3.015%, and Australian sovereign debt hit its highest levels since 2011. Equity markets across the Asia-Pacific region mirrored this anxiety, with the Kospi falling 3.7% and the Nikkei dropping 2.9% as investors retreated from riskier assets.
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