Rising oil prices, concerns over the Strait of Hormuz, and anticipation ahead of major US bank earnings and the upcoming CPI report also weighed on investor sentiment. US stock futures and several Asian markets also traded lower.
KOSPI Tumbles as Oil Prices Jump
The KOSPI led losses across Asian markets on Monday as investors reacted to the escalating tensions between the United States and Iran, rising oil prices, and anticipation ahead of a busy week of corporate earnings and key US inflation data.
South Korea's benchmark KOSPI index plunged more than 7%, and fell below the 7,000 level for the first time since early May. The decline came as investors shifted toward risk-off assets after military exchanges in the Middle East. The smaller Kosdaq index also moved lower, and lost nearly 2% during the session.
KOSPI price over the past 24 hours (Source: Google Finance)
Japan's Nikkei 225 fell 2.45%, while the Topix index declined 0.52%. US stock futures also pointed to a weaker open. Dow Jones Industrial Average futures fell 229 points, or 0.43%, while S&P 500 futures declined 0.58%. Nasdaq-100 futures fell 1.37% as investors reduced exposure to technology stocks ahead of earnings.
Market sentiment deteriorated after Iran and the United States exchanged military strikes over the weekend. Iran claimed it targeted US facilities in several Gulf countries and announced the closure of the Strait of Hormuz, one of the world's most important shipping routes for oil exports. However, US President Donald Trump disputed the claim on Sunday by stating that the waterway remained open to commercial traffic after authorizing US airstrikes against Iran.
The geopolitical uncertainty pushed oil prices sharply higher. Brent crude futures climbed 3.7% to approximately $79.81per barrel, while West Texas Intermediate crude gained more than 3% to around $74.05 per barrel as traders priced in potential supply disruptions.
(Source: ATFX)
Despite the geopolitical concerns, analysts believe markets will stay focused on economic data and the start of the second-quarter earnings season. Ben Emons, founder of Fed Watch Advisors, said the uncertainty surrounding the Strait of Hormuz is likely to keep investors cautious unless there is a sustained threat to global energy supplies. He added that attention will also turn to upcoming inflation data, Federal Reserve developments, and corporate earnings.
Several of the largest US banks, including JPMorgan Chase, Goldman Sachs, Morgan Stanley, Bank of America, Citigroup, and Wells Fargo, are scheduled to report quarterly results this week. Investors will also closely monitor earnings from Netflix, Johnson & Johnson, and UnitedHealth.
Investors will also receive another important economic update on Tuesday with the release of the US Consumer Price Index (CPI) report, which could influence expectations for future Federal Reserve interest rate decisions.
