The ongoing Iran-U.S. conflict continues to shake the Asia-Pacific stock markets: both Japan and South Korea's stock markets suffer heavy losses, with Kospi plunging over 4% at one point.

Tuesday, as tensions between the U.S. and Iran continue to escalate, Asia-Pacific markets generally opened lower, with Japan and South Korea leading the decline.

As of press time, South Korea’s benchmark KOSPI index fell by 3.6%, having dropped over 4% intraday. South Korea’s financial markets were closed yesterday for a holiday.

Daewoo Airlines’ stock price plummeted over 8%. Reports indicate that due to U.S. strikes on Iran, Daewoo Airlines has suspended flights from Incheon to Dubai, with the suspension lasting until March 5.

However, defense-related stocks in South Korea generally surged. Korea’s largest aerospace and defense company Hanwha Aerospace’s stock price once soared over 22%. South Korea’s military electronics firm LIG NEX1’s stock price hit the daily 30% limit.

The Japanese stock market continued its decline from the previous day. As of press time, the Nikkei 225 and the Topix both fell over 2%.

Japanese pharmaceutical and automotive stocks took heavy hits. As of press time, Sumitomo Pharmaceuticals dropped over 16%, and Toyota fell nearly 6%.

The Australian benchmark index S&P/ASX 200 opened down 0.57%. As of press time, the decline widened to over 1%. The previous day, the index saw a slight increase.

Overnight, U.S. markets experienced intense volatility, ultimately closing roughly flat. Early in the session, geopolitical tensions caused a sharp sell-off, with the Nasdaq dropping as much as 1.6% and the Dow Jones nearly 600 points lower. However, multiple buy-the-dip rebounds helped markets recover.

At the close, the three major indices showed mixed results: the Dow fell 73.14 points, or 0.15%, to 48,904.78; the Nasdaq rose 80.65 points, or 0.36%, to 22,748.86; the S&P 500 increased by 2.74 points, or 0.04%, to 6,881.62.

On the news front, late on March 2 (local time), an advisor to the commander of Iran’s Islamic Revolutionary Guard Corps announced that the Strait of Hormuz has been closed, and Iran will target all ships attempting to pass through. The IRGC has not yet issued an official statement.

According to Kpler data, last year, over 14 million barrels of oil per day were transported through the strait, accounting for nearly one-third of global seaborne crude oil exports.

JPMorgan economists believe that the impact of the Iran conflict on the global economy mainly depends on the duration of hostilities. Rising oil prices are viewed as the most likely channel to trigger significant economic chain reactions.

The report states that if the conflict is short-lived, oil prices could quickly return to previous levels, with limited impact on the global economy. Conversely, if oil prices remain high into the first half of 2026, energy price shocks could reduce the global GDP growth rate by 0.6 percentage points in the first half of the year and push up global consumer inflation by over 1 percentage point.

In Tuesday’s Asian trading session, international oil prices continued to rise. As of press time, U.S. crude oil futures and Brent crude futures both increased by over 1%. On Monday, U.S. crude futures closed at $71.23, up $4.21 or 6.3%; Brent crude futures rose by $4.87 or 6.7%, to $77.74 per barrel.

The surge in oil prices has led traders to cut back on bets of Fed rate cuts this year. Swap traders now expect the Federal Reserve to cut rates by 56 basis points this year, down from 60 basis points last Friday.

(Source: Cailian Press)