Oil prices surged, gold hit a more than six-year high and most equities tumbled Monday after the US assassination last week of a top Iranian general fanned fears of a major conflict in the Middle East.
Safe-haven assets popular in times of turmoil were also on the rise, with gold at highs not seen since mid-2013, while the Japanese yen was at a three-month high against the dollar.
And Donald Trump fuelled more concern as he keeps tweeting about a “major retaliation” against Tehran after it threatened revenge for the killing Friday of commander Qassem Soleimani.
The killing shocked world markets and sparked a sell-off in stocks and a spike in crude.
Iran announced on Sunday a further rollback of its commitments to its nuclear accord, while Iraq’s parliament demanded the departure of US troops from the country as fallout from the attack spread.
The crisis has jolted investors, who had been in an upbeat mood as China and the US prepare to sign their mini trade deal next week, while data indicates a slight improvement in the global economy.
Both main crude contracts rallied in Asian trade, with Brent above $70 for the first time since September when attacks on two Saudi Arabian facilities briefly halved output by the world’s top producer.
While facing criticism for the action and calls to dial down the tension, the US president was in combative mood, saying the White House had dozens of sites lined up for strikes in case of retaliation by Iran — adding that he did not need Congressional approval, even for a “disproportionate” hit.
“They attacked us, & we hit back. If they attack again, which I would strongly advise them not to do, we will hit them harder than they have ever been hit before!”, Trump said in one of his combative tweets on Sunday.
“The United States just spent Two Trillion Dollars on Military Equipment. We are the biggest and by far the BEST in the World! If Iran attacks an American Base, or any American, we will be sending some of that brand new beautiful equipment their way…and without hesitation!
“These Media Posts will serve as notification to the United States Congress that should Iran strike any U.S. person or target, the United States will quickly & fully strike back, & perhaps in a disproportionate manner. Such legal notice is not required, but is given nevertheless!”, he wrote.
The losses on equity markets extended into Asia, with Tokyo down almost two percent as dealers returned for the first time since the new year break. Hong Kong lost 0.8 percent.
Singapore fell 0.7 percent, Seoul shed one percent, Taipei and Mumbai each lost more than one percent and Manila dived 0.9 percent, with Jakarta down 0.7 percent.
Shanghai ended flat as investors cheered a pledge by authorities at the weekend to support China’s troubled banking sector and small businesses in the face of a growing debt mountain.
While markets were broadly lower, energy firms rallied on the back of higher crude prices. Inpex jumped more than four percent in Tokyo while in Hong Kong, PetroChina added four percent and CNOOC surged 3.6 percent.