Asia stocks slide as US and Iran threaten to escalate war

Major stock markets in Asia have slumped after Washington and Tehran threatened to escalate hostilities, as the US-Israel war with Iran enters its fourth week.

Japan's Nikkei share index closed 3.5% lower, while South Korea's Kospi fell by 6.5%. In Europe, London's FTSE 100 opened down 1.4%.

US President Donald Trump warned on Saturday he would "obliterate" Iranian power plants if Iran did not open the key Strait of Hormuz shipping route. Iran said it would respond to any such strikes by targeting key infrastructure in the region.

Japan and South Korea have been particularly affected by the conflict, as they are heavily dependent on oil and gas that would normally pass through the strait.

About 20% of the world's oil and liquefied natural gas usually passes through the waterway — and the war has sent global fuel prices soaring.

On Monday, International Energy Agency chief Fatih Birol said that the war could see the world facing its worst energy crisis in decades.

Speaking at the National Press Club in Australia's capital, Birol compared the current energy crisis to those of the 1970s and the impact of Russia's 2022 invasion of Ukraine.

"This crisis as things stand is now two oil crises and one gas crash put all together," he said.

In a social media post published at 23:44 GMT Saturday, Trump said: "If Iran doesn't FULLY OPEN, WITHOUT THREAT, the Strait of Hormuz, within 48 HOURS from this exact point in time, the United States of America will hit and obliterate their various POWER PLANTS, STARTING WITH THE BIGGEST ONE FIRST!"

That threat came after Iranian missiles hit the Israeli city of Dimona, and shortly before a second attack on the town of Arad nearby.

Mohammad Bagher Ghalibaf, the speaker of the Iranian parliament, said on Sunday that energy and desalination infrastructure in the region would be "irreversibly destroyed" if his country's power plants were attacked.

Such action would significantly escalate the conflict, which has already disrupted global energy supplies, pushing up prices and causing fuel shortages.

Simon Flowers, chairman and chief analyst at energy consultancy Wood Mackenzie, said the markets were waiting to see if the threats were "carried through".

"If the US does strike Iranian infrastructure, it escalates the whole intensity of the war a step further and then we'd have to see if Iran strikes back at infrastructure tit-for-tat as they've done over the last week or so," he told the BBC's Today programme.

Global oil prices rose on Monday, with Brent crude climbing more than 1% to above $113.40 (£85.30) a barrel and US-traded oil was up more than 2% at $100.50.

UK Prime Minister Sir Keir Starmer spoke to Trump on Sunday and they discussed the need to reopen the Strait of Hormuz.

Later on Monday, Sir Keir is set to chair a meeting of the government's emergency Cobra committee, which will be attended by Bank of England governor Andrew Bailey.

The meeting is expected to focus on energy security and the resilience of supply chains, and discuss the impact of the war on the cost of living.