Markets at a glance
Asian stock markets showed a mixed picture on Friday, yet the region remained poised for substantial weekly losses as geopolitical tensions in the Middle East and a sharp rise in oil weighed on investor sentiment. During Asian trading hours, Wall Street futures held broadly flat after U.S. stock indexes extended declines overnight.
Geopolitical strain and energy risk
The conflict involving Iran, Israel and the United States entered its seventh day on Friday with no clear signs of de-escalation. Market participants are increasingly focused on the potential for the fighting to disrupt global energy flows, particularly through the Strait of Hormuz - a narrow chokepoint that carries roughly one-fifth of the world's oil supply.
Oil prices have reflected those supply worries, rallying sharply this week as traders priced in the risk of interruptions to deliveries from the Middle East. Crude has jumped by more than 15% over the week, a move that has weighed on Asian equities and on regional currencies, with the effect most pronounced in energy-importing economies.
Index performance and weekly trajectories
South Korea's KOSPI fell about 1% on Friday and was on track for a nearly 12% drop over the week. Japan's Nikkei 225 inched 0.6% higher on the day but nonetheless remained headed for an approximately 6% decline for the week. Mainland China benchmarks - the Shanghai Composite and the Shanghai Shenzhen CSI 300 - were set to finish the week down by more than 1%.
Hong Kong's Hang Seng rose 2% on Friday, yet it was still positioned for a weekly decline near 3%. India's Nifty 50 edged lower and was shaping up for a 2% weekly fall. In the Asia-Pacific region, Australia's S&P/ASX 200 slipped 1%, while Singapore's Straits Times Index traded flat on the session.
Inflation, policy and the path ahead
The rise in oil has revived worries about a renewed wave of inflation that could complicate the outlook for major central banks, including the Federal Reserve. Higher energy costs tend to feed through into broader price pressures, which could make policymakers more hesitant to move toward rate cuts in the near term.
Investors are also watching developments on Wall Street, where equities have fallen this week amid both the geopolitical turbulence and higher bond yields. Market attention is turning to key U.S. economic data due later on Friday, notably the February nonfarm payrolls report, which market participants expect will offer guidance on the health of the U.S. economy and the likely course for U.S. interest rates.
Outlook
Regional markets remain sensitive to developments in the Middle East and to any further moves in energy prices. With geopolitical uncertainty persisting and U.S. economic data able to sway expectations about monetary policy, markets are likely to remain volatile in the near term.