Global financial markets came under pressure on Thursday, with equities sliding across Asia and oil prices surging more than 4%, after president Donald Trump signalled that the US would intensify military action against Iran over the next few weeks.
Investor sentiment weakened sharply after president Trump, in his first national address since the Iran conflict began, warned that US forces would continue to hit Iran 'extremely hard' and 'finish the job', raising concerns of a prolonged conflict and disruption to global energy supplies.
Asian markets reacted negatively in early trade. Japan’s Nikkei 225 fell 1.4% to 53,004.81, while South Korea’s Kospi dropped as much as 3.4% to 5,292.36. Hong Kong’s Hang Seng Index declined 0.8% to 25,082.59, reflecting broad risk aversion among investors.
US stock futures also pointed to a weak opening. Futures linked to the S&P 500 fell about 0.8%, while Nasdaq Composite futures dropped around 1%, and Dow Jones Industrial Average futures were down roughly 350 points, according to international media reports.
The sharpest reaction was seen in oil markets, where prices surged amid fears of supply disruptions. Global benchmark Brent crude climbed above US$105 per barrel in Asian trading, rising more than 3% during and after president Trump’s speech. US West Texas Intermediate crude futures also gained over 4%, crossing US$104 levels.
Markets had been expecting signals of de-escalation or a clear exit strategy. Instead, president Trump’s remarks suggested that while the campaign is nearing completion, further military action is imminent, increasing uncertainty over the timeline and economic impact.
“We are going to hit them extremely hard over the next two to three weeks,” president Trump says, adding that the US would 'bring them back to the Stone Ages'.
The ongoing conflict has put the spotlight on the Strait of Hormuz, a critical artery for global oil shipments. Continued disruption in the region could tighten supply and keep prices elevated.
A report by Oxford Economics estimated that the war has already created a 10% shortfall between global oil supply and demand, raising the risk of widespread rationing and supply chain disruptions, particularly in emerging economies.
Higher crude prices have also intensified inflation concerns globally. In the US, gasoline prices have crossed US$4 per gallon, adding pressure on households and businesses. While president Trump described the rise in fuel costs as temporary, economists cautioned that a prolonged conflict could lead to slower growth and persistent inflationary pressures.
Indian Markets Track Global Weakness
Indian equities mirrored the global selloff, opening sharply lower on Thursday. The BSE Sensex fell 872 points or 1.19% to open at 72,262, while the Nifty 50 dropped about 1.31% to 22,383.40. Both indices extended losses in early trade.
Selling was broad-based, with banking, auto, metal, realty, and healthcare stocks leading the decline. Heavyweights such as Sun Pharma, IndiGo, Asian Paints, Larsen and Toubro, and Axis Bank are among the top laggards on the Nifty.
Despite the near-term volatility, the broader outlook remains cautiously optimistic, supported by domestic institutional investor (DII) inflows and improving macroeconomic indicators. However, Indian markets are likely to remain 'event-driven', with crude oil prices, foreign institutional investor (FII) activity, and developments in West Asia dictating trends.
On Wednesday, FIIs sold equities worth Rs8,331 crore, while DIIs provided partial support with purchases worth Rs7,171.80 crore.
The Indian rupee also remained under pressure, though it showed signs of stabilisation amid fluctuating global risk sentiment.
War Rhetoric Unsettles Investors
In his address, president Trump defended the military campaign, stating that core strategic objectives are 'nearing completion' and comparing the pace of the operation with past US wars, including World War II and the Vietnam War.
He argued that the current operation had achieved in just over a month what previous conflicts took years to accomplish, claiming Iran had been 'eviscerated' as a threat.
At the same time, his warning of continued strikes in the coming weeks unsettled investors, who had been hoping for signs of de-escalation.
The evolving situation poses a dual risk — supply-side shocks through higher oil prices and demand-side weakness if prolonged uncertainty dampens global growth.
With geopolitical tensions escalating and energy markets tightening, global financial markets are expected to remain volatile in the near term, with investors closely tracking developments in the West Asia conflict and policy responses from major economies.
