Global markets tumble as conflict escalates

Asian share markets experienced a downturn on Monday, with the U.S. dollar strengthening amid escalating threats between the United States and Iran. Iran declared it would strike the energy and water systems of its Gulf neighbors if President Trump followed through with a threat to hit Iran's electricity grid within 48 hours, dashing hopes for an early resolution to the ongoing war.

Global markets are reacting to the heightened risks. Stock markets in Australia and New Zealand saw significant declines in early trading, while Japanese Nikkei futures also indicated losses. Wall Street futures showed a similar trend, with S&P 500 and Nasdaq futures dipping. Analysts predict the conflict could continue for many weeks, potentially driving oil prices much higher and prolonging supply disruptions.

This energy shock, coupled with increased defense spending, has led to double-digit increases in bond yields globally over the past week. The heightened market volatility has benefited the U.S. dollar, which is seen as a store of liquidity. The U.S., as a net energy exporter, holds a relative advantage over net energy-importing regions like Europe and much of Asia.