Asian Markets Cautious as Gulf Tensions Keep Oil Prices High

Asian stock markets showed mixed results Monday as ongoing conflicts in the Gulf region continued to drive up oil prices. Central banks across multiple countries are preparing for policy meetings this week with inflation concerns taking center stage.

Markets across Asia displayed cautious trading Monday as continuing conflicts in the Gulf region maintained pressure on oil prices, creating complications for central banks preparing for key policy decisions this week.

A potential development emerged when the Wall Street Journal reported that the Trump administration may announce within days that several nations have committed to forming a coalition for escorting vessels through the Strait of Hormuz.

Speaking to the Financial Times, President Donald Trump warned that NATO’s future would be severely impacted if allied nations failed to provide assistance.

European Union foreign ministers are scheduled to meet Monday to consider strengthening their limited naval presence in the Middle East, though any operations in the Strait would carry significant dangers.

Energy markets remained unsettled with Brent crude climbing 0.1% to reach $103.27 per barrel, while U.S. crude dropped 0.7% to $97.99.

Central bank officials from the United States, United Kingdom, Europe, Japan, Australia, Canada, Switzerland and Sweden are convening their first comprehensive meetings since hostilities began, with energy costs casting a shadow over all discussions.

JPMorgan’s chief economist Bruce Kasman explained the situation: “Central bank forecasts will immediately bias towards higher inflation and lower growth. Consistent with this view, we have pushed back or removed action for most central banks that were expected to move in March and April.”

Kasman added: “Developments on the ground highlight the potential for further price increases and the likelihood that the risk premium will remain elevated.”

Japan’s Nikkei index declined 0.1%, while South Korean markets gained 0.9% following losses in the previous week. MSCI’s comprehensive Asia-Pacific index excluding Japan rose marginally by 0.1%.

Within the region, attention will center on Chinese economic statistics released Monday, with retail sales expected to improve in February following a weak beginning to the year, while industrial output growth is projected to maintain approximately 5%.

Senior officials from the United States and China are also convening in Paris to explore potential agreements covering agriculture, essential minerals and managed trade arrangements for Presidents Trump and Xi Jinping to review during meetings in Beijing.

S&P 500 and Nasdaq futures rebounded 0.4% during volatile trading sessions. Although earnings season has concluded, artificial intelligence concerns will dominate attention as Nvidia presents its GTC conference in Silicon Valley this week, where the company plans to unveil cutting-edge chip and AI infrastructure developments.

The anticipated energy crisis, coupled with budget pressures from increased defense expenditures, caused global bond yields to experience double-digit jumps last week.

Ten-year Treasury yields reached 4.26%, climbing 32 basis points since the conflict started, while futures markets have dramatically reduced expectations for upcoming rate reductions.

The Federal Reserve is virtually certain to maintain current rates Wednesday, with the probability of easing by June falling to just 26%, down from 69% one month ago.

Market participants will focus on the statement’s language and press conference, monitoring whether the median “dot plot” forecasts from policymakers eliminate any additional easing for the remainder of this year.

A cautiously stable result is anticipated from all other central bank meetings, except the Reserve Bank of Australia, which is likely to raise its cash rate by a quarter point to 4.1% as it confronts renewed domestic inflation.

The increased market volatility has generally favored the U.S. dollar as a liquidity refuge. The United States also maintains net energy exporter status, providing advantages over Europe and much of Asia, which depend on energy imports.

The dollar traded slightly lower early Monday, responding partly to reports about potential escort services through the Strait of Hormuz.

The dollar weakened to 159.47 yen, just below a 20-month peak of 159.75, with investors remaining cautious as a break above 160.00 could prompt additional intervention warnings from Japan.

The euro remained near a seven-month low at $1.1440, approaching a potential break of significant chart support at $1.1392 that could trigger a decline toward $1.1065.

In commodity trading, gold held steady at $5,022 per ounce, receiving limited support despite its traditional roles as a safe haven and inflation hedge.