Asian markets tumble as Strait of Hormuz crisis sends oil above $111, bond yields hit multi-year highs

Asian markets declined sharply on Monday as escalating tensions in the Gulf pushed crude oil prices and global bond yields higher, while investors also turned cautious ahead of Nvidia’s highly anticipated earnings later this week.

Fresh geopolitical concerns emerged after a drone strike caused a fire at a nuclear power plant in the United Arab Emirates, while Saudi Arabia reported intercepting three drones. US President Donald Trump also warned that Iran must act “fast” to reach a deal.

Markets remain deeply focused on the Strait of Hormuz, which is currently operating with only limited shipping activity as Tehran attempts to formalise its control over the crucial waterway that normally handles nearly 20% of global oil trade.

Oil prices climb sharply

Brent crude rose 1.9% to $111.34 per barrel, while US crude climbed 2.3% to $107.84 per barrel amid fears of prolonged supply disruption.

Analysts at Capital Economics warned that if the Strait remains shut for an extended period, Brent crude could potentially rise to $130-140 per barrel or even higher, creating serious inflationary risks globally.

The G7 finance ministers are scheduled to meet in Paris to discuss the Hormuz crisis and supply chain concerns surrounding critical raw materials.

Bond yields jump globally

Global bond markets came under heavy pressure as investors priced in the possibility of persistent inflation and tighter monetary policy.

The yield on the US 10-year Treasury note touched a 15-month high of 4.631%, while 30-year bond yields climbed to 5.159%. Japanese bond yields also rose to levels not seen since 1996 after the government proposed fresh borrowing measures linked to the economic impact of the Iran conflict.

Investors now increasingly fear that central banks may be forced to keep interest rates higher for longer to contain inflationary pressures from rising energy costs.

Asian equities under pressure

Japan’s Nikkei index declined 1.1%, while South Korean stocks slipped 0.1%. MSCI’s broad Asia-Pacific index outside Japan lost 0.9%. Chinese blue-chip stocks remained relatively stable despite weak economic data.

China’s April retail sales rose only 0.2% against expectations of 2% growth, while industrial production increased 4.1%, both below market expectations.

US stock futures also traded lower, with S&P 500 futures down 0.6% and Nasdaq futures declining 0.8%. European futures pointed to a weak opening as well.

Nvidia earnings become key focus

The AI-driven market rally now faces a major test with Nvidia set to report earnings on Wednesday. Nvidia shares have surged 36% since March lows, while the Philadelphia Semiconductor Index has jumped over 60% amid aggressive AI infrastructure spending.

Analysts at Citi warned that much of the recent earnings strength in US markets has been concentrated in a narrow group of stocks and partly supported by one-time items.

Currency and commodity markets

The US dollar strengthened further amid risk aversion, benefiting from its safe-haven appeal and America’s position as a net energy exporter. The euro traded at $1.1616, while the British pound weakened sharply.

Gold prices edged slightly lower by 0.2% to $4,527 per ounce despite elevated geopolitical risks.