Asian equity benchmarks mostly moved lower on Friday, with investors remaining cautious as little progress appeared to have been made toward de-escalation in the U.S.-Israel conflict with Iran. The risk that the conflict will keep energy prices elevated and feed inflationary pressures was a dominant theme in trading.
Regional sentiment was influenced by a weak lead from Wall Street, where losses overnight reflected investor concern that oil-driven inflation could delay any plans by the Federal Reserve to cut interest rates. Against that backdrop, S&P 500 futures were trading higher by 0.4% at 22:12 ET (02:12 GMT) as Asian markets dealt with fresh headlines.
Oil markets remained volatile. Prices eased in Asian trading after the U.S. announced additional waivers on Russian oil aimed at offsetting supply shocks tied to the Iran conflict, but Brent crude still posted strong gains for the week and was holding close to $100 per barrel.
Regional performance and market drivers
Japan and South Korea led losses across the region. The Nikkei 225 and the KOSPI each fell about 1.2% on the day, while Japan’s broader TOPIX lost roughly 0.6%. Honda Motor Co Ltd (TYO:7267) shares plunged by more than 6% after the automaker said restructuring costs associated with its electric-vehicle business would result in its first-ever annual loss, adding notable pressure on the Nikkei.
For the week, the Nikkei was trading down about 3.3%, with the KOSPI set to record an approximately 1.4% decline. The regional sell-off was tied in part to concerns that supply interruptions from the Iran conflict could ripple through economies heavily dependent on Middle Eastern oil.
Reports that Tehran had blocked the Strait of Hormuz in response to U.S. and Israeli action were cited as a near-term risk for oil shipments. Analysts and market participants flagged Japan, South Korea, and India as among the most exposed economies because of their high reliance on imported crude. India’s Nifty 50 index was on track for a roughly 2.4% loss for the week.
China’s markets show relative resilience
Chinese shares performed better than many of their regional peers. The Shanghai Shenzhen CSI 300 and the Shanghai Composite rose slightly on the day, leaving both indexes on modest weekly gains. Mainland Chinese markets were viewed as comparatively insulated from immediate oil supply shocks.
Hong Kong’s Hang Seng slipped 0.2% on Friday and was nursing a small weekly decline of about 0.3%, with local technology names showing some weakness.
Analysts at OCBC noted that China’s substantial oil stockpiles, coupled with a shift toward renewables and electric vehicles, offered near-term insulation against disruptions in global oil supplies. The country imports around 15% of its oil from Iran. Earlier in the week, Chinese authorities announced an immediate ban on all refined fuel exports to address a domestic supply shortage.
Other markets and monetary policy considerations
Elsewhere in the region, markets’ moves were mixed. Australia’s ASX 200 posted a small gain on Friday but remained down more than 2% on the week amid rising conviction that the Reserve Bank of Australia will raise interest rates by 25 basis points at its upcoming meeting. Singapore’s Straits Times index advanced about 0.2% and was set for a modest weekly gain of roughly 0.3%.
The broader market narrative connected energy security to inflation and monetary policy paths. Traders continued to weigh whether higher energy costs resulting from the Iran conflict would be sufficient to keep central banks on a tighter track for longer, potentially delaying hoped-for rate cuts.
Bottom line
At the end of the trading week, most Asian equity markets had recorded losses as geopolitical risks around Iran persisted and investors digested the economic implications of higher oil prices. Japan and South Korea underperformed, driven in part by a heavy drop in Honda shares after an unprecedented annual loss warning, while mainland China’s exchanges managed modest gains, supported by factors seen as cushioning the economy from immediate oil shocks.