On Friday, the Asian financial markets were roiled by a series of developments that sent shockwaves across global markets. Reports of heightened tensions in the Middle East, particularly between Israel and Iran, sparked a flight to safety among investors, leading to sharp declines in Asian shares and bond yields, while safe-haven assets like currencies, gold, and crude oil soared.
MSCI’s broadest index of Asia-Pacific shares plummeted by 2.3%, reflecting widespread selling pressure across the region. Similarly, U.S. stock futures indicated a 1.5% decline, suggesting that the turmoil in Asian markets could spill over to Wall Street. The catalyst for this market turmoil was media reports suggesting that Israeli missiles had targeted a site in Iran, escalating geopolitical tensions in the region.
As investors sought refuge from the uncertainty, U.S. long-term Treasury yields tumbled by as much as 13.5 basis points to 4.512%. Safe-haven currencies, including the Japanese yen and the Swiss franc, rallied against the dollar, while gold prices surged by 1.3% to $2,409.45 per ounce, nearing the record high reached just a week earlier.
Market analysts voiced concerns about the potential for further escalation of tensions in the Middle East, which could lead to increased volatility and geopolitical risk premium in global markets. Brent crude futures spiked by more than 3% amid fears of disruptions to oil supply from the region, adding to market jitters.
The cryptocurrency market also felt the impact of the geopolitical turmoil, with Bitcoin plunging by as much as 6.2% to a 1-1/2-month low of $59,590.74 per coin, as investors sought safety in traditional assets.
The reports of Israeli airstrikes in Iran came on the heels of recent clashes between the two countries. Iran had launched drones and missiles targeting Israel in response to a suspected Israeli strike on its embassy compound in Syria, escalating tensions in the region.
Across Asia, stock markets recorded steep losses, with Japan’s Nikkei sliding by 3.3%, Taiwan’s benchmark index skidding by 3.8%, and Hong Kong’s Hang Seng dropping by 2%. The semiconductor sector bore the brunt of the selling pressure, with investors reacting negatively to Taiwan Semiconductor Manufacturing Co.’s decision to maintain its capital spending plans unchanged. The stock slumped by as much as 6.6%, exacerbating the overall market weakness.
Amidst the geopolitical tensions, uncertainty surrounding monetary policy, and disappointing corporate earnings, investors remained cautious, awaiting further developments and details regarding the situation in the Middle East. The market landscape remained highly fluid, with investors closely monitoring geopolitical developments and their potential impact on global markets.