Asian stock markets dropped sharply on Thursday, with Japan and Hong Kong leading the losses, as rising geopolitical tensions unsettled investors. The decline followed a media report suggesting the U.S. was preparing for a potential military strike on Iran.
U.S. stock futures also fell during Asian trading hours, reflecting widespread investor caution over the escalating Israel-Iran conflict.
Market participants were also closely monitoring the Federal Reserve’s recent interest rate decision and Chair Jerome Powell’s warnings about tariff-driven inflation.
Hong Kong Leads Declines With Over 1% Drop
Investor sentiment deteriorated after Bloomberg reported that senior U.S. officials were considering a military strike on Iran, possibly as soon as the upcoming weekend—signaling a possible sharp escalation in the regional conflict.
President Donald Trump added to the uncertainty, stating on Wednesday that while he had “ideas” for responding to Iran, any decision would be made “one second before it’s due.” He left open the possibility that the U.S. may or may not take military action.
The tension intensified after Iran’s Supreme Leader, Ayatollah Ali Khamenei, dismissed Trump’s demands for unconditional surrender and declared that neither war nor peace could be imposed on the Islamic Republic.
Meanwhile, the Federal Reserve held interest rates steady and Chair Powell warned that inflation driven by trade tariffs could intensify this summer—further dampening investor risk appetite.
Regional Market Performance
- Hong Kong’s Hang Seng Index dropped over 1%, extending losses from the previous session.
- Japan’s Nikkei 225 fell 0.7%, while the broader TOPIX slipped 0.6%.
- China’s Shanghai Composite Index edged down 0.3%, and the CSI 300 dipped 0.2%.
- South Korea’s KOSPI declined 0.5%.
- Singapore’s Straits Times Index lost 0.2%.
- India’s Nifty 50 futures fell 0.2%.
- Indonesia’s Jakarta Composite Index dropped more than 1%.
Australian Market Holds Steady Despite Jobs Data
Australia’s S&P/ASX 200 remained mostly flat on Thursday. Employment data released the same day showed an unexpected contraction in the labor market for May, although the unemployment rate held steady. The figures suggest the job market remains tight but may provide room for the Reserve Bank of Australia to consider further rate cuts.