BANGKOK: Shares skidded in Asia on Monday, with Tokyo’s Nikkei 225 index shedding 1.9% on concern over escalating tensions in the Middle East following the killing by a U.S. air strike of an Iranian general.
Shares also fell in most other Asian markets, apart from in Australia.
The Shanghai Composite index gave up early gains despite a report that Chinese officials plan to visit Washington next week for the signing of a trade deal with President Donald Trump.
Asian economies depend heavily on oil from the Middle East, and oil prices surged, with U.S. crude up 2% and Brent crude up 2.3%. Stocks fell broadly on Wall Street on Friday, ended a five-week winning streak for the S&P 500 a day after the benchmark index hit its latest record high.
An Iranian general who replaced the leader killed by the U.S. airstrike in Baghdad vowed Sunday to take revenge as Tehran abandoned the remaining limits of its 2015 nuclear deal with world powers in response to the slaying.
Esmail Ghaani’s threat came as the backlash over the U.S. killing of top Iranian general Qassem Soleimani mounted, with Iraq’s parliament calling for the expulsion of all American troops from Iraqi soil.
The Nikkei 225 index in Japan slid 1.9% to 23,204.86 while Hong Kong’s Hang Seng index lost 1.2% to 28,116.45. In South Korea, the Kospi lost 1% to 2,154.64. The Shanghai Composite index slipped 0.4% to 3,070.48. India’s Sensex sank 1.5% to 41,825.56. Shares also fell in Taiwan and Southeast Asia.
Benchmark U.S. crude oil climbed $1.28, or 2.1%, to $64.33 per barrel. It jumped 3.1% to $63.05 per barrel on Friday. Brent crude, used to price international oils, rose $1.57 or 2.3% to $70.17 per barrel. It rose $2.35, or 3.5%, to close at $68.60 per barrel on Friday.
The dollar fell to 107.99 Japanese yen from 108.09 yen on Friday. The euro was flat at $1.1160.
Technology, financial and health care stocks accounted for much of the selling Friday on Wall Street. Companies that rely on consumer spending also fell, along with airlines. Several energy stocks got a boost from higher oil prices. Defense contractors also notched gains.
President Donald Trump said the attack was ordered because Soleimani was plotting to kill many Americans. The Pentagon took steps to reinforce the American military presence in the Middle East in preparation for reprisals from Iran.
The air strike marks a major escalation in the conflict between Washington and Tehran, just as investors were basking in expectations of a settling of trade tensions between the U.S. and China. A report in the Hong Kong newspaper South China Morning Post said Chinese officials planned to leave for Washington on Jan. 13 for a Jan. 15 signing of a “Phase 1” trade deal that the two sides said would be signed in early January.
Tensions between the two biggest economies have rattled financial markets since Trump began imposing punitive tariffs on imports from China in the summer of 2018, seeking to redress the U.S. deficit and push for changes in Chinese industrial and technology policies.
Now, the ratcheting of tensions in the Middle East bringing on a fresh bout of jitters.
“The nasty wake-up calls ... no one wanted to start the year have roused the global stock market as investors had assumed smoothing sailing hereafter the P1 trade deal was announced. Now they’re scrambling to seek out safe harbors in the wake of the Middle East strike,” Stephen Innes of AxiTrader said in a commentary.
The S&P 500 dropped 0.7% to 3,234.85, ending with a 0.2% loss for the week. The Dow Jones Industrial Average fell 0.8%, to 28,634.88. The Nasdaq lost 0.8% to 9,020.77 and the Russell 2000 index of smaller company stocks gave up 0.4% to 1,660.87.
The major stock indexes were coming off record highs after closing out 2019 earlier in the week with the best annual performance by the S&P 500 and Nasdaq since 2013.
The price of gold, which investors buy in times of uncertainty as a safe haven of value, rose $27.00, or 1.7%, to $1,579.40 per ounce.
Bond prices rose. The yield on the 10-year Treasury fell to 1.77% from 1.79% late Friday, a big move. Lower bond yields bring down the interest rates that banks charge for mortgages and other consumer loans, making them less profitable.