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Asian equity markets saw sharp declines on Friday as escalating tensions in the Middle East, following Israel’s strikes on Iran, sparked a broad risk-off sentiment. Investors were also rattled by fresh trade worries after President Donald Trump hinted at the possibility of increasing auto tariffs soon.
Middle East Tensions Trigger Sell-Off
In Japan, the Nikkei 225 dropped 1.2%, while South Korea’s KOSPI fell 1.3%. Hong Kong’s Hang Seng index slid 0.8%, as investors flocked to safe-haven assets and commodities, moving away from equities amid growing geopolitical risks.
The sell-off was triggered by Israel’s large-scale airstrike targeting several Iranian nuclear, missile, and military sites early on Friday. This military action raised fears of retaliatory strikes from Iran, which could further disrupt stability in the region. Sirens blared across Israel, and emergency protocols were enacted in response to the heightened risks of missile or drone attacks from Iran.
U.S. Secretary of State Marco Rubio confirmed that Israel acted independently in the strikes, citing self-defense as the primary motivation. This development reignited concerns over the potential disruption of oil flows in the Middle East and the broader implications for global growth, which added to the already fragile investor sentiment, exacerbated by global trade uncertainties.
Widespread Losses Across Asia-Pacific
In China, both the Shanghai Composite index and the Shanghai Shenzhen CSI 300 fell by 0.7%. Australia’s S&P/ASX 200 dropped 0.4%, while Singapore’s Straits Times Index declined 0.5%. India’s Nifty 50 slipped 1%, and Indonesia’s Jakarta Stock Exchange Composite Index lost 0.6%.
The broad sell-off in equities reflected global risk aversion, with markets turning towards defensive assets in response to the heightened geopolitical and trade concerns.
Trump Tariff Concerns Add to Negative Sentiment
Adding to the negative mood, President Trump’s warning on Thursday about the potential for increased auto tariffs weighed heavily on markets. His comments stirred fresh concerns about trade relations, just a day after claiming that the U.S.-China trade deal was “done.”
Trump also revealed that he would send letters to major U.S. trading partners within the next two weeks, outlining his planned trade tariffs ahead of a July 9 deadline to finalize trade deals. This announcement further fueled worries about global trade tensions, adding to the already fragile market environment.
Friday’s market sell-off across Asia was driven by a combination of rising geopolitical risks from the Israel-Iran conflict and renewed concerns over trade tensions, particularly the potential for new U.S. tariffs. With investors flocking to safer assets, the broader market sentiment remains fragile, as uncertainty over Middle East stability and global trade negotiations continue to cloud the economic outlook.
