Asian stock markets tumbled sharply Monday amid escalating threats between the United States and Iran, as the conflict entered its fourth week with no signs of de-escalation. Major indexes in Japan and South Korea fell more than 5%, driven by investor fears over potential disruptions to global energy supplies through the Strait of Hormuz.

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Japan's Nikkei 225 declined nearly 5%, while the broader Topix dropped 4.4%. South Korea's Kospi plunged over 5%, extending recent heavy losses as the energy-import-dependent economy faces mounting pressure from soaring oil prices. Hong Kong's Hang Seng and China's Shanghai Composite also retreated, with the latter falling more than 2%.

The sell-off followed fresh rhetoric from U.S. President Donald Trump, who issued a 48-hour ultimatum to Tehran late Saturday, threatening to "obliterate" Iran's power infrastructure if the Strait of Hormuz is not fully reopened to international shipping. The deadline expires Monday evening in New York time.

Iran has defied the demand, with officials vowing continued resistance and retaliatory actions. Over the weekend, Iranian missile strikes injured more than 150 people in southern Israeli cities including Arad and Dimona, according to reports. Israel responded with intensified airstrikes on Iranian missile, nuclear and energy facilities, including the South Pars natural gas field shared with Qatar.

The Strait of Hormuz, through which about 20% of global oil trade passes, has seen disrupted flows amid the fighting. Brent crude, the international benchmark, hovered near elevated levels after surging in recent weeks, with some sessions pushing toward $112 a barrel earlier in the conflict—its highest in nearly four years. U.S. crude also climbed, reflecting broader concerns over supply risks.

Analysts say the threats mark a dangerous expansion of the war beyond direct military targets into critical economic chokepoints. "The risk of escalation is extremely high as Iran demonstrates retaliatory capability," military analyst Elijah Magnier told Al Jazeera. Markets are pricing in prolonged uncertainty, with energy importers in Asia particularly vulnerable.

South Korea and Japan, heavily reliant on Middle East liquefied natural gas and oil imports, have borne the brunt of the sell-off. South Korea's Kospi has seen steep declines in recent sessions, triggering circuit breakers in some cases to curb panic selling. Taiwan's TAIEX and other regional indexes also weakened amid supply-chain worries.

The conflict began in late February with coordinated U.S. and Israeli strikes on Iran, reportedly killing Supreme Leader Ayatollah Ali Khamenei and other top officials in the initial wave. What started as targeted operations has broadened into sustained air campaigns and retaliatory exchanges, with no breakthrough in mediation efforts by Oman, Egypt or others.

Trump has faced domestic pressure over rising U.S. energy prices, though he has suggested the war could "wind down" soon in some comments. However, recent actions—including additional U.S. troop and warship deployments to the region—signal sustained operations. Reports indicate thousands more Marines and naval assets, including the USS Boxer Amphibious Ready Group, are moving to secure shipping lanes and potentially target Iran's Kharg Island oil export hub.

Global markets have reacted unevenly. While Asian indexes led declines Monday, U.S. equity futures pointed lower but have shown some resilience in prior sessions. The S&P 500 has posted weekly losses amid inflation fears from higher energy costs, though it clawed back some ground in afternoon trading on certain days. European indexes like the Stoxx 600 also fell sharply earlier in the week.

Investors are reassessing the economic fallout, including higher inflation that could delay central bank rate cuts. The Federal Reserve's outlook has dimmed, with expectations for easing fading as oil-driven price pressures mount. Gold and other safe havens have seen volatile moves, while the dollar strengthened against most peers as a flight to safety unfolded.

The war's trajectory remains uncertain. Reuters reported that neither side appears prepared for ceasefire talks despite back-channel efforts. Iran's regime has shown resilience, continuing missile and drone attacks on U.S. and Israeli assets. Israel has struck deep into Iranian territory, targeting infrastructure vital to Tehran's economy and military capabilities.

For Asia, the implications extend beyond stocks. Higher energy costs threaten to crimp growth in manufacturing-heavy economies, disrupt supply chains and fuel inflation. Airlines, shipping firms and energy-intensive industries have come under particular pressure, with shares in those sectors leading declines.

Market watchers warn that a prolonged conflict—now stretching into its fourth week—could push oil into the $100–$150 range, risking recessions in vulnerable regions. Schwab analysis highlights Asia's exposure, noting that international developed and emerging-market stocks may struggle to rebound quickly even if fighting eases.

As trading continues in Asia, attention remains on whether Trump's ultimatum prompts concessions or further escalation. Diplomats and analysts express concern that miscalculations could draw in more regional players, amplifying global economic risks.