Asian stock drop as Middle East crisis worsens

Nikkei 225 and TOPIX indexes dropped between 2.8% and 3.5%, while KOSPI declined nearly 5%

Asian stocks dropped on Monday as growing fears of an escalation in the U.S.-Israel war on Iran.

Japan and South Korea were the worst performers, with the two countries, along with India, seen as relatively more vulnerable to disruptions in global energy supplies.

Persistent concerns that rising oil prices will fuel stickier global inflation and more hawkish central banks also weighed on markets, with oil prices remaining upbeat in Asian trade.

Nikkei 225 and TOPIX indexes dropped between 2.8% and 3.5%, while KOSPI declined nearly 5%. The two were the worst performers in Asia on Monday.

South Korea was hit by concerns over a more hawkish Bank of Korea in the coming months, after the government nominated economist Shin Hyun-song as the new Governor of the country’s central bank.

Shin’s remarks in previous interviews have struck a hawkish chord, especially his warnings against excessive lending and inflation.

ING analysts said they viewed Shin as a hawkish appointment, and that the BOK was now more likely to raise interest rates later this year.

Broader Asian markets dropped across the board, as risk appetite was battered by a worsening Middle Eastern war.

In Asia, Hang Seng index slipped 3.1%, while Shanghai Shenzhen CSI 300 and Shanghai Composite indexes shed nearly 2% apiece.

ASX 200 dropped 0.7%, while Straits Times index slid 1.8%.

Futures for Nifty 50 index dropped 0.3%.

Elsewhere, markets took a weak lead-in from U.S. stock market, which marked four straight weeks of losses amid few signs of de-escalation in the Middle Eastern war. S&P 500 Futures declined 0.2% by 02:15 GMT.