Asian and European equities declined sharply on Thursday amid heightened geopolitical tensions in the Middle East, particularly following reports that Iran fired on three ships in the Strait of Hormuz and escorted two into Iranian waters, marking an escalation in the ongoing conflict. Iranian media confirmed the Revolutionary Guard moved the vessels to Iran, while White House press secretary Karoline Leavitt stated the seizures did not violate ceasefire terms. Iranian parliament speaker Mohammad Bagher Ghalibaf asserted that reopening the strait would be 'impossible' as long as the US and Israel continue what he described as 'flagrant' ceasefire violations, including a US naval blockade. President Donald Trump indicated the current truce would remain in place indefinitely as Washington awaits a renewed peace proposal from Tehran [1][2].
Asian markets responded negatively: Japan’s Nikkei 225 fell over 1% to near 58,900, China’s SSE Composite Index declined 0.79% below 4,100, Hong Kong’s Hang Seng Index dropped 1.12% below 25,900, and South Korea’s KOSPI retreated 0.61% to 6,380 after reaching a record high of 6,557 the previous day. The KOSPI had rallied on technology stocks but lost momentum as higher energy prices and persistent Middle East uncertainty increased Korea’s import bill. Japanese equities were weighed down by rising oil prices, reflecting the country’s heavy reliance on Middle East crude imports. West Texas Intermediate (WTI) crude rose for the third consecutive day, trading around $93.30 per barrel [1][2].
European markets also opened in negative territory, with the U.K.'s FTSE 100 index seen 0.7% lower, Germany's DAX down 1.3%, France's CAC 40 down 0.77%, and Italy's FTSE MIB 0.9% lower. International benchmark Brent crude surged almost 1.3% to $103.19 per barrel, following reports that the U.S. intercepted at least three Iranian oil tankers in Asian waters. Germany halved its economic growth forecasts for 2026, now expecting only 0.5% growth this year and 0.9% in 2027, citing the Iran war and closure of the Strait of Hormuz as key reasons. Inflation is projected to rise to 2.7% this year and 2.8% next year, with increased costs for households and businesses [3].
Market sentiment remains cautious, with traders in Japan focusing on the upcoming Bank of Japan (BoJ) policy meeting. The consensus is that the BoJ will keep rates unchanged this month but may signal a shift toward policy normalization as early as June. In Hong Kong, investors are taking profits and adopting a cautious stance ahead of March inflation data, with sentiment influenced by the mixed global backdrop [1][2].
European bourses missed out on gains enjoyed by U.S. peers on Wednesday, closing lower as investors weighed the extension of the Iran war ceasefire against the continued blockage of the Strait of Hormuz. S&P 500 futures were little changed Wednesday night. Earnings reports from major European companies and data releases, including flash services and manufacturing PMIs, are expected to further influence market direction [3].
CONCLUSION
Escalating tensions in the Strait of Hormuz and rising oil prices have triggered broad declines across Asian and European markets, with key indices retreating and economic forecasts downgraded. Persistent uncertainty surrounding the Middle East conflict and its impact on energy costs are weighing heavily on investor sentiment. Forward-looking statements suggest central banks and policymakers remain cautious, with potential shifts in monetary policy and inflation expectations closely watched.