Asia report: Most markets fall on Iran-stoked inflation fears

(Sharecast News) - Asia-Pacific markets mostly fell on Monday as investors weighed renewed geopolitical tensions after US president Donald Trump warned Iran to "get moving, FAST," raising fears of further escalation in the Middle East and fresh disruption to global oil supplies.

"Global bonds are starting the week under heavy pressure as the Iran risk premium pushes crude higher and forces markets to reprice inflation risk," said Patrick Munnelly, market strategy partner at TickMill.

"Trump's warning that 'for Iran, the clock is ticking' has reinforced concerns that the conflict could move back toward a more active military phase, delaying any normalisation of traffic through the Strait of Hormuz."

In a post on Truth Social on Sunday, Trump said "the Clock is Ticking" for Iran and warned there "won't be anything left" if action was not taken soon, adding that "TIME IS OF THE ESSENCE!"

He did not specify what steps he wanted Iran to take or what consequences could follow.

Tensions between Washington and Tehran have remained elevated despite a fragile ceasefire reached in early April, with the US continuing its blockade of Iranian ports and Iran keeping the Strait of Hormuz closed since the conflict began.

Oil prices rose as supply concerns returned to the fore, with Brent crude futures last up 1.09% on ICE at $110.45 per barrel, and the NYMEX quote for West Texas Intermediate gaining 1% to $106.47.

Most Asia markets close lower

Japan's Nikkei 225 fell 0.97% to 60,815.95, while the broader Topix also declined 0.97% to 3,826.51.

Marui Group dropped 8.53%, Nikon lost 7.95%, and Subaru Corporation fell 7.11%.

Yields on Japan's 10-year government bond jumped more than nine basis points to 2.793%, extending a selloff as global bond yields rose on mounting inflation concerns.

"Japan is becoming a focal point for global bond stress," Munnelly said.

"The rise in JGB yields reflects not only imported inflation pressure from energy but also news of a planned fiscal support package to cushion the oil shock.

"That combination - higher inflation risk plus more fiscal supply or deficit concern - is exactly what global fixed income markets are least willing to absorb right now."

Munnelly added that Australia and New Zealand bonds were also under pressure, "highlighting that this is not a local Japan story but a wider duration repricing".

In China, the Shanghai Composite slipped 0.09% to 4,131.53, while the Shenzhen Component fell 0.2% to 15,530.23.

Guangdong Mingzhu Group dropped 10.04%, Quzhou XinAn Development lost 10.02%, and Shaanxi Baoguang Vacuum Electronic Apparatus declined 10.02%.

China's economy weakened in April, with retail sales and industrial production both significantly missing forecasts.

Retail sales rose just 0.2%, slowing sharply from March's 1.7% increase and well below expectations for a 2% gain, marking the weakest growth since 2022.

Car sales fell 15.3%, household appliances dropped 15.1%, and gold and jewellery sales were also sharply lower.

Industrial output grew 4.1%, down from 5.7% in March and below forecasts for 5.9%, while fixed asset investment unexpectedly fell 1.6% after rising 1.7% the previous month.

House prices also remained under pressure.

"The international environment was complex and severe, the spillover effects of geopolitical conflicts continue to emerge, global energy markets fluctuated at high levels and the difficulty of the world economic recovery increased," said an NBS spokesperson.

Ipek Ozkardeskaya, senior analyst at Swissquote, said the data "looked particularly bleak", with the weakness "largely explained by heavy disruption linked to the Iran war".

Lynn Song, chief economist for Greater China at ING, said the softness in industrial production was surprising given recent strong export data, but added that "sluggish domestic activity is dragging many other categories".

He noted that "the impact of the Iran war is also appearing in the data", with crude oil processing volume down 5.8% year on year.

Hong Kong's Hang Seng Index fell 1.11% to 25,675.18.

Li Auto tumbled 14.15%, Longfor Properties lost 7.78%, and China Resources Mixc Lifestyle declined 6.19%.

South Korea outperformed, with the Kospi 100 rising 0.88% to 9,097.86.

Hanwha Solutions gained 6.77%, SK Holdings rose 5.37%, and Samsung Electronics added 3.88%.

"Equities are struggling with the same message," Munnelly said.

"MSCI Asia is down 0.9% and futures point to further declines in Europe and the US as investors question whether elevated equity valuations can survive a higher oil, higher yield backdrop.

"South Korea remains the exception, with the Kospi reversing early losses ... on a rebound in Samsung Electronics, but that looks more like residual AI resilience than a broader risk-on signal," he added.

"The equity story has not fully broken, but it is increasingly dependent on a narrow group of technology leaders delivering enough earnings momentum to offset a more hostile macro environment."

Australasian bourses feel the pressure

Turning down under, Australia's S&P/ASX 200 dropped 1.45% to 8,505.30.

Tuas plunged 62.79%, Brambles fell 20.23%, and AP Eagers lost 6.3%.

Across the Tasman Sea, New Zealand's S&P/NZX 50 declined 1.56% to 12,762.92.

Synlait Milk dropped 10.87%, Ryman Healthcare fell 6.1%, and SkyCity Entertainment Group lost 5.17%.

Dollar mixed on regional peers

In currencies, the dollar was last up 0.11% on the yen to trade at JPY 158.91, as it slipped 0.04% against the Aussie to AUD 1.3980, and fell 0.29% on the Kiwi to change hands at NZD 1.7076.

"The bottom line is that the market is no longer just debating whether AI can keep equities elevated; it is now asking whether global bond markets can absorb an oil shock, fiscal responses and central banks that may be forced to stay restrictive for longer," Munnelly said.

Reporting by Josh White for Sharecast.com.