Asian Markets Tumble Amid Fears of Middle East Oil Supply Disruption

Hong Kong. Asian stock markets turned red on Wednesday. Stock indices fell sharply due to concerns over potential disruption to oil supply from the Middle East. South Korean stock indices were the hardest hit.

South Korea's Kospi index closed down 13.71 percent at 5,093.54 points. The Kospi had also fallen 7 percent on Tuesday. According to Saxo strategist Neil Wilson, the index was particularly affected by selling pressure following high growth in major chip companies this year.

Other markets in the region were also under pressure on Wednesday. Japan's Nikkei market closed down 4.08 percent at 2,0206.05 points. Taiwan's TSEX, dependent on chip manufacturing companies, fell 50.41 percent to settle at 1,494.77 points.

In Hong Kong, the Hang Seng fell 2.19 percent, while China's Shanghai Composite dropped nearly 1 percent. Asian economies are heavily dependent on oil coming from the Middle East. This oil is mainly supplied through the Strait of Hormuz, partially controlled by Iran.

It was reported that shipping through that waterway has almost stopped, and most of the Gulf region's energy exports have been cut off from the world market. According to the International Energy Agency, over 80 percent of the crude oil shipped through the strait last year went to Asia.

Amid concerns over energy supply disruption, US President Donald Trump ordered on Tuesday that the US government would provide insurance and guarantees for ships passing through the Gulf. He also stated that the US Navy would escort tankers through the Strait of Hormuz if necessary.

However, despite this intervention, oil and natural gas prices continued to rise on Wednesday. Brent Crude, the international benchmark for oil, rose 1 percent in morning trading to $82 per barrel, while the US benchmark WTI also rose at a similar rate.

In Europe, stock markets in the UK, Germany, and France returned to positive territory on Wednesday after sharp declines on Tuesday. US futures also signaled that markets would open slightly higher.

Jefferies analyst Mohit Kumar wrote, 'US investors are more focused on what Trump will do, but they are underestimating Iran's potential reaction.' He added, 'We remain on the cautious side and are not in a buying mode for the market.'

Economists have warned that if the conflict in the Middle East drags on, it could lead to rising inflation and slow economic growth worldwide. As a net exporter of oil, the US is expected to be less affected than Europe and Asia.