Peter HoskinsEconomic journalist
Asia’s main stock markets collapsed on Monday after Washington and Tehran threatened to escalate hostilities, as the war in Iran enters its fourth week.
Japan’s benchmark Nikkei 225 index was down almost 3.6%, while South Korea’s Kospi fell almost 6%.
US President Donald Trump warned on Saturday that he would “wipe out” Iran’s power plants if Iran did not open the main shipping route through the Strait of Hormuz. Iran has said it would respond to such strikes by targeting key infrastructure in the region, including energy facilities.
Japan and South Korea have been particularly hard hit by the conflict, as they are heavily dependent on the oil and gas that would normally pass through the strait.
About 20% of the world’s oil and liquefied natural gas (LNG) typically pass through the waterway – and the war has sent global fuel prices soaring.
On Monday, the head of the International Energy Agency, Fatih Birol, said the war could present the world with its worst energy crisis in decades.
Speaking at the National Press Club in the Australian capital, Birol compared the current energy crisis to those of the 1970s and the impact of Russia’s invasion of Ukraine in 2022.
“As it stands, this crisis is now made up of two oil crises and a gas crisis,” he said.
“If Iran does not COMPLETELY, WITHOUT THREAT, open the Strait of Hormuz, within 48 hours from this very moment, the United States of America will strike and wipe out their various POWER PLANTS, STARTING WITH THE LARGEST FIRST!,” Trump said in a social media post posted Saturday at 11:44 p.m. GMT.
The threat came after Iranian missiles struck the Israeli town of Dimona and shortly before a second attack on the neighboring town of Arad.
Mohammad Bagher Ghalibaf, speaker of Iran’s parliament, said on Sunday that the region’s energy and desalination infrastructure would be “irreversibly destroyed” if his country’s power plants were attacked.
Such action would significantly escalate the conflict, which has already disrupted global energy supplies, driving up prices and causing fuel shortages.
Other markets in the Asia-Pacific region were also lower on Monday.
The Hong Kong Hang was down almost 3.5% and the Shanghai Stock Exchange Composite Index was down 2.5%.
Global oil prices remained broadly stable, with Brent crude up 0.45% to $112.69 (£84.56) a barrel and US-traded oil up 0.7% to $98.93.