Oil prices soared 3% after an attack on a Kuwait cruise ship, Asia-Pacific stock markets fell across the board, South Korea's stock index fell 4%, and U.S. stock futures continued to fall.

# Long Yue

Source: Wall Street CN

Escalating tensions in the Middle East, with Iran’s attack on a Kuwaiti oil tanker, pushed international oil prices up by more than 3%, with WTI crude breaking through $106 per barrel. Geopolitical risks and inflation fears hammered global equities, triggering a broad sell-off in Asia-Pacific markets. The MSCI Asia Pacific Index erased all its gains for the year, while South Korean stocks plunged 4%. Although Federal Reserve Chair Jerome Powell downplayed short-term inflation risks, stabilizing U.S. Treasury yields, risk aversion remained pervasive across markets.

As geopolitical conflicts in the Middle East continue to intensify, Iran’s attack on a Kuwaiti oil tanker has sparked fresh concerns over energy supplies, sending international oil prices surging again and dragging down global stock markets.

Asia-Pacific equities fell across the board on Tuesday. The MSCI Asia Pacific Index wiped out all its year-to-date gains, with Japan’s Nikkei 225 dropping 2.5%, South Korea’s KOSPI falling 4%, and U.S. stock futures also trading lower. Fed Chair Powell downplayed the short-term inflationary risks from rising energy prices, helping U.S. Treasury yields stabilize.

The latest developments show that Kuwait Petroleum Corporation confirmed its fully loaded oil tanker *Al-Salmi* was attacked by Iran at Dubai Port in the United Arab Emirates, sustaining hull damage and catching fire, with a potential oil spill. Spurred by the news, WTI crude futures surged as much as 3.7% to $106.70 per barrel, while Brent crude futures also rose more than 3%, topping $109 per barrel.

Meanwhile, U.S. President Donald Trump’s tough rhetoric further amplified market fears of a worsening situation. Trump warned that if Tehran does not reopen the Strait of Hormuz, the U.S. will destroy Iran’s power plants, oil facilities, and desalination infrastructure.

Chris Weston, Head of Research at Pepperstone Group, noted: “The market is facing persistent geopolitical headline risk, which will continue in the coming days and weeks. Skepticism remains high about a near-term ceasefire.”

### Oil Prices Surge, Gold and Silver Trade in Narrow Range

The ongoing Middle East conflict has directly roiled global energy markets. The attack on the Kuwaiti tanker, compounded by the de facto closure of the Strait of Hormuz, has put crude oil supplies under severe strain. WTI crude extended its strong rally from the previous session on Tuesday, hitting its highest level since July 2022.

Gold and silver edged slightly lower.

### Asia-Pacific Stocks Hammered

Dual pressures from soaring oil prices and heightened geopolitical risks triggered a broad-based sell-off in Asia-Pacific equities on Tuesday. The MSCI Asia Pacific Index fell 1% during the session, marking its fourth consecutive day of losses and erasing all gains accumulated since the start of 2026. The index has slumped 13% so far this month, its worst monthly performance since October 2008.

In detail, Japan’s Nikkei 225 plummeted 2.5%, with the Topix index falling 1.5%. South Korea’s KOSPI crashed 4%, sending the Korean won to its lowest level against the U.S. dollar since March 2009.

U.S. markets also came under pressure, with S&P 500 futures down 0.3%. The Nasdaq 100 has now fallen 12% from its all-time high reached in October.

Chris Senyek of Wolfe Research stated: “The market continues to be driven by headlines, with the Trump administration sending mixed signals about both de-escalation and escalation in the Iran conflict. As such, we maintain a defensive positioning.”

### Fed Downplays Short-Term Inflation Risks

Despite soaring oil prices reigniting inflation concerns, Fed Chair Powell sought to calm markets in his remarks on Monday. Powell said long-term inflation expectations appear well-anchored, and the near-term inflationary impact from rising energy prices is limited.

Powell noted that inflation expectations are “well-anchored beyond the near term,” adding that policymakers may need to address the conflict’s effects eventually, but not yet. His comments led traders to scale back bets on interest rate hikes, helping U.S. Treasury yields stabilize.

Krishna Guha of Evercore analyzed: “Powell’s calm tone, combined with the market’s belated focus on growth risks from persistently high oil prices, is helping drive a shift in rate pricing. The odds of one or more rate cuts are now far higher than those of hikes.”

### Institutional Views and Market Moves

Against the backdrop of extreme market volatility, institutional investor behavior is closely watched. According to Bloomberg, Goldman Sachs’ trading desk reported that hedge funds are showing signs of capitulation, with momentum fading among systematic investors. Goldman Sachs expects trend-following investors (CTAs) to become buyers across all scenarios over the next month.

On the corporate front, Reuters reported that Morgan Stanley’s E*TRADE unit is in talks with SpaceX to sell IPO shares to retail investors. Separately, Sysco Corp. announced it will acquire wholesale distributor Jetro Restaurant Depot LLC for $29.1 billion, including debt, creating one of the largest food service groups in the U.S.

---

## Risk Warning and Disclaimer

The market is subject to risks, and investments should be made with caution. This article does not constitute personalized investment advice, nor does it take into account the specific investment objectives, financial situations, or needs of individual users. Readers should consider whether any opinions, views, or conclusions in this article are appropriate to their particular circumstances. Any investment decisions made based on this article are at one’s own risk.