Asian stock markets fell sharply on Wednesday as investors reacted to escalating conflict in the Middle East and growing concerns over a potential energy shock.
In Seoul, shares dropped around 4%, extending two-day losses beyond 11%. The sell-off came as fast-money traders and foreign investors exited the market after a strong rally driven by artificial intelligence demand for memory chips.
The sharp decline also pushed the South Korean won to its weakest level in 17 years.
Japan and Korea hit by energy concerns
Japan’s Nikkei index also declined, falling 2.5% for a third consecutive session. Both Japan and South Korea rely heavily on imported energy, making them vulnerable to rising oil prices.
Brent crude futures have climbed more than 12% this week, trading at about $81.40 per barrel.
However, prices eased slightly after U.S. President Donald Trump ordered an insurance guarantee for ships travelling through the Gulf and indicated that the U.S. Navy could escort oil tankers through the Strait of Hormuz if required.
Conflict broadens regional risks
U.S. and Israeli forces have continued air strikes on Iran for four days. In response, Iranian drones and missiles reportedly targeted Gulf oil refineries and U.S. diplomatic facilities in Saudi Arabia and Kuwait.
Damien Boey, portfolio strategist at Wilson Asset Management in Sydney, said the conflict appears likely to last longer than initially expected.
He noted that attacks on oil infrastructure are forcing investors to reassess how long disruptions could continue.
Markets adjust positions
Gold prices fell about 4.5% overnight as investors closed profitable positions to cover losses elsewhere in volatile trading.
Early in the Asian session, gold steadied at around $5,128 per ounce. Meanwhile, U.S. and European futures showed signs of stabilisation. S&P 500 futures were flat, while European futures rose about 0.8%.
On Wall Street, the S&P 500 closed 0.8% lower as investors weighed the risk of prolonged higher oil prices.
Inflation and interest rate concerns
Market participants are now focused on the potential impact of higher energy prices on inflation.
Chuck Carlson, Chief Executive Officer at Horizon Investment Services, said investors are assessing whether oil prices will remain elevated for longer than expected and how that could influence interest rate decisions.
Meanwhile, the euro slipped below $1.16 as traders anticipated that Europe could face greater pressure from rising energy costs.
Benchmark European gas prices have already surged about 65% over the past two days.
Reuters
Last modified: March 4, 2026
