Asian stock markets fell sharply on Monday, and U.S. Treasury yields rose to about an eight-month high as investors quickly shifted to defensive positioning following further escalation in the Middle East situation. Reuters reported that Iran threatened to attack Gulf neighbors' energy and water systems if the U.S. implements a strike on its power infrastructure; Trump demanded that Iran reopen the Strait of Hormuz within 48 hours. This statement led the market to believe that the war will not cool down in the short term, and global assets have been re-pricing in higher oil prices and stronger inflationary pressures.
The simultaneous occurrence of stock market declines and rising yields highlights the typical stagflation trade of "growth under pressure, inflation on the rise." Reuters data showed that Japan's Nikkei index fell about 3.9% on Monday, Korean stocks dropped about 4.5%, and the MSCI Asia Pacific excluding Japan index slipped about 1.2%; meanwhile, the U.S. 10-year Treasury yield rose to about 4.41%, the highest in eight months.
Oil prices remain at the core of this round of market volatility. Reuters reported that Brent crude fluctuated between $111.90 and $112.11 per barrel, with U.S. crude fluctuating between $98.17 and $98.35; Brent's cumulative gain in March has reached about 55%, and the market is still assessing the ongoing impact of potential transport disruptions in the Strait of Hormuz and damage to Gulf energy facilities.
In this context, the interest rate market has clearly abandoned the previous "global continued easing" narrative. Reuters pointed out that traders are instead betting on a longer high-interest-rate environment for major developed economies and have even started discussing the possibility of partial rate hikes. For stocks, higher financing costs, squeezed profit margins, and an increase in the discount rate to valuations constitute triple pressures. The latter judgment is an analytical inference based on current market pricing.
