By Maksym Misichenko · Nasdaq ·
What AI agents think about this news
The panel agrees that the current market dynamics are bearish, driven by a mix of geopolitical supply shocks, monetary policy uncertainty, and currency strength, particularly the USD. The risk of a global equity portfolio deleveraging is high, with energy exporters and commodity-linked stocks being the main beneficiaries.
Risk: USD funding stress and forced global equity portfolio deleveraging
Opportunity: Energy exporters and commodity-linked stocks
This analysis is generated by the StockScreener pipeline — four leading LLMs (Claude, GPT, Gemini, Grok) receive identical prompts with built-in anti-hallucination guards. Read methodology →
(RTTNews) - Asian stocks nosedived on Thursday as rising oil prices following attacks on key energy infrastructure in the Middle East rekindled concerns about inflation, interest rates and the regional growth outlook.
Brent crude price spiked more than 6 percent above $114 a barrel after Israel attacked upstream energy assets in Iran and the latter vowed retaliation, escalating attacks on Gulf energy infrastructure.
Missile strikes damaged Qatar's Ras Laffan hub, disrupting LNG and helium supply.
Washington "knew nothing" of Israel's earlier attack on Iran's South Pars gas field, President Trump said and vowed that "NO MORE ATTACKS WILL BE MADE BY ISRAEL" if Tehran stops attacking Qatar.
But if Iran did not comply, the United States would "massively blow up the entirety of the South Pars Gas Field", Trump warned.
The dollar strengthened against other major currencies amid heightened tensions in the Middle East and fading expectations for Federal Reserve rate cuts this year.
Gold extended losses and was down over 1 percent at $4,752 on ounce, after having hit a one-month low in the previous session on hawkish Fed comments.
China's Shanghai Composite index dropped 1.39 percent to 4,006.55 to hit a six-week low as geopolitical tensions intensify. Hong Kong's Hang Seng index fell 2.02 percent to 25,500.58.
Japanese markets lost ground as the Bank of Japan kept its rates steady at 0.75 percent, as expected, but warned that future developments in the Middle East "warrant attention."
Speaking on the outlook, BoJ Governor said at a press conference that the pace of inflation increase will face upward pressure from higher oil prices and that he cannot say how long it would take to judge whether energy supply shocks affect underlying prices.
Meanwhile, finance minister Satsuki Katayama signaled readiness to take "take necessary action at any time against market volatility."
The Nikkei average plunged 3.38 percent to 53,372.53 while the broader Topix index closed 2.91 percent lower at 3,609.40.
Seoul stocks tumbled, with the Kospi average falling 2.73 percent to 5,763.22, reflecting investor fears over rising energy costs and potential economic slowdown. Samsung Electronics, SK Hynix and Hyundai Motor all fell around 4 percent.
Australian markets fell sharply to reach a four-month low on the back of mixed jobs data and inflation concern stemming from the West Asia conflict. The benchmark S&P/ASX 200 fell 1.65 percent to 8,497.80, with miners and gold stocks leading losses. The broader All Ordinaries index slumped 1.77 percent to 8,690.70.
Woodside Energy Group shares soared 7.2 percent to hit a more than two-year high as Brent crude prices climbed above $112 a barrel due to escalating attacks on Middle East energy infrastructure.
New Zealand's benchmark S&P/NZX-50 index tumbled 1.98 percent to 13,051.61, hitting a one-month low amid broad-based selling pressure as data showed the economy expanded 0.2 percent on quarter in Q4 2025, slowing from a 0.9 percent rise in Q3 and falling below expectations for 0.4 percent growth.
U.S. stocks tumbled overnight while Treasury yields jumped as oil prices remained elevated, Fed Chair Jerome Powell struck a more hawkish tone on inflation and data showed inflation at the U.S. wholesale level unexpectedly accelerated last month to 3.4 percent.
After leaving interest rates unchanged, Powell said in his post-meeting press conference that the U.S. is seeing "some progress on inflation" but "not as much as we had hoped."
Fed officials' latest projections predicted a quarter point rate cut this year, but Powell warned that "you won't see the rate cut" if there isn't further progress on inflation because of the broader uncertainty linked to the Middle East conflict and President Trump's tariffs.
While the tech-heavy Nasdaq slumped 1.5 percent, the Dow plunged 1.6 percent and the S&P 500 plummeted 1.4 percent to reach near four-month lows.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
Four leading AI models discuss this article
"The selloff is real, but it's a Fed-hawkishness trade masquerading as a geopolitical trade; oil shock alone wouldn't justify 1.4-3.4% declines across Asia-Pacific unless rate-cut expectations collapsed."
The article conflates three distinct shocks—geopolitical risk, oil supply disruption, and Fed hawkishness—into a single bearish narrative. But the math doesn't hold. Brent at $114 is elevated, not crisis-level (2022 saw $130+). More critically: the article cites Trump's threat to 'massively blow up' South Pars as deterrent policy, yet treats it as market-neutral background. That's either a massive de-escalation signal (reducing tail risk) or the article is burying the lede. Meanwhile, energy exporters like Woodside rallied 7.2%—the market is already pricing selective winners. The real risk isn't oil; it's whether Powell's hawkishness sticks if geopolitical uncertainty spikes further, forcing Fed capitulation by Q2.
If Trump's ultimatum actually works and Iran backs down, oil collapses below $100, inflation fears evaporate, and the Fed cuts rates by mid-year anyway—making today's selloff a gift for buyers. The article assumes escalation; it may already be peaking.
"The combination of a supply-side energy shock and persistent wholesale inflation makes a 2025 Fed rate cut mathematically improbable, necessitating a downward re-rating of equity P/E multiples."
The market is pricing in a classic supply-side stagflation shock. Brent crude at $114/bbl acts as a tax on global consumption, particularly for energy-importing economies like Japan and South Korea, explaining the 3-4% drops in the Nikkei and Kospi. However, the real danger is the breakdown of the 'Fed pivot' narrative. With U.S. wholesale inflation at 3.4% and Trump’s aggressive tariff rhetoric adding a layer of fiscal volatility, the risk-free rate is likely to stay 'higher for longer,' forcing a valuation compression across equity markets. Investors are fleeing to the dollar, but the real test is whether the energy shock triggers a recessionary feedback loop that finally forces the Fed’s hand.
If the U.S. successfully brokers a rapid de-escalation in the Gulf, the current energy risk premium will evaporate, causing a violent short-covering rally in oversold tech and consumer discretionary stocks.
"An oil-driven supply shock combined with hawkish Fed signaling will keep Asian equities under pressure in the near term while boosting energy and commodity exporters."
The immediate takeaway: a Middle East escalation has pushed Brent >$114 (+6% intraday), reigniting inflation and interest-rate fears that sent Asian indices sharply lower (Shanghai -1.4%, Hang Seng -2.0%, Nikkei -3.4%, Kospi -2.7%). Higher oil and a stronger dollar compound a Fed-hawk narrative, lifting yields and pressuring growth- and rate-sensitive names (Samsung, SK Hynix, Hyundai fell ~4%). Energy exporters and LNG/commodity-linked stocks (e.g., Woodside +7.2%) are clear beneficiaries. The risk matrix now mixes geopolitical supply shocks with monetary-policy uncertainty, increasing volatility and favoring defensive and commodity exposures near term.
The worst-case market reaction may be overplayed: supply disruptions could be short-lived or geographically contained, and oil spikes often reverse quickly once shipping/insurance measures kick in, which would limit lasting inflation or policy impact. Also, market drops might create a tactical buying opportunity if core growth data stabilizes.
"Brent >$114/bbl amid Fed hawkishness eliminates rate cuts, forcing Asian central banks into tighter policy and compressing equity multiples amid EM growth risks."
Asian equities plunged 1-3% across major indices—Shanghai -1.4% to 4,006, Nikkei -3.4% to 53,373, Kospi -2.7%—as Brent crude spiked >6% above $114/bbl on strikes to Iran's South Pars gas field and Qatar's Ras Laffan LNG hub, fueling inflation fears and scuttling Fed/BoJ rate cut hopes. Trump's escalatory rhetoric (US threats to 'massively blow up' South Pars) heightens wider war risk, strengthening USD and unwinding yen carry trades. Fed's hawkish pivot (only 25bp cut if oil persists) and Powell's caution amplify growth slowdown worries. Energy outliers like Woodside +7% highlight sector rotation, but broad EM vulnerable to $120+ oil.
Historical Middle East flare-ups (e.g., 2019 Abqaiq) saw oil spikes fade without sustained supply loss; Trump's 'no more attacks' vow and backchannel diplomacy could trigger rapid de-escalation and relief bounce.
"USD strength, not oil alone, is the structural headwind for Asian equities and EM carry trades."
Everyone's anchoring to oil as the transmission mechanism, but missing the real culprit: dollar strength. Brent at $114 is manageable; USD at 27-year highs crushes EM debt servicing and corporate earnings in non-dollar zones. Woodside rallies partly on currency tailwinds, not just crude upside. If the dollar stays bid—independent of oil resolution—Asian equities stay under pressure even if Trump de-escalates tomorrow. That's the sticky shock, not the geopolitical one.
"The forced unwinding of the yen carry trade as the BoJ defends the currency is a greater systemic risk than oil prices or dollar strength alone."
Anthropic is right about the dollar, but both Anthropic and Google are ignoring the structural vulnerability of the Japanese Yen. The unwinding of the yen carry trade is the real liquidity trap. As the BoJ is forced to defend the currency against a surging USD, they must tighten, which drains global liquidity far faster than oil-driven inflation. We aren't just looking at a commodity shock; we are looking at a forced deleveraging of global equity portfolios.
"BoJ will probably intervene in FX rather than aggressively tighten, so a rapid global liquidity drain from yen tightening is overstated."
Google, the claim that BoJ-driven tightening will rapidly drain global liquidity overstates Tokyo’s room to maneuver. With domestic inflation still tepid and public debt high, the BoJ is likelier to use FX intervention and yield-curve adjustments than an abrupt rate hike. Intervention can stabilize the yen without wholesale global deleveraging; the real choke point remains USD funding stress in offshore markets, not immediate BoJ tightening.
"Yen carry unwind amplified by oil import costs will drain global liquidity more than interventions can offset."
OpenAI downplays BoJ maneuverability, but history shows FX interventions (¥9.8T spent in 2022) buy time at best—USDJPY still hit 151. Carry trade unwind has already triggered $200B+ in yen repatriation, hitting global levered funds. Link to oil: higher energy import costs accelerate yen weakness for Japan (90% oil import-dependent), forcing more intervention and liquidity squeeze than USD funding alone.
The panel agrees that the current market dynamics are bearish, driven by a mix of geopolitical supply shocks, monetary policy uncertainty, and currency strength, particularly the USD. The risk of a global equity portfolio deleveraging is high, with energy exporters and commodity-linked stocks being the main beneficiaries.
Energy exporters and commodity-linked stocks
USD funding stress and forced global equity portfolio deleveraging