Markets in Europe gain while Asian shares swoon as the war with Iran widens and oil surges higher

European markets opened higher on Wednesday, providing a brief respite after widespread sell-offs across Asian exchanges, where South Korea’s benchmark Kospi plummeted over 12% amid escalating Middle East tensions.

The ongoing conflict between the United States and Israel against Iran entered its fifth day, with Israel targeting Iranian leadership and security forces while Iran responded with missile barrages and drone attacks throughout the region. Oil prices surged more than 3% as a result, reflecting growing concerns about potential disruptions to global energy supplies.

U.S. President Donald Trump has suggested the conflict could last a month or longer, creating significant uncertainty in global markets. “I think the Iran situation is getting out of hand, and I think that U.S. President Donald Trump miscalculated enormously,” said Francis Lun, CEO of Venturesmart Asia. “The situation is very grim.”

Despite the geopolitical turmoil, European markets showed resilience in early trading. Germany’s DAX edged up 0.2% to 23,851.86, while France’s CAC 40 remained nearly unchanged. Britain’s FTSE 100 dipped slightly by 0.1%.

The situation was far more severe in Asian markets, particularly in South Korea, where the Kospi index plunged 12.1% to 5,093.54. The dramatic drop prompted the Korea Exchange to temporarily halt trading. The tech-oriented Kosdaq suffered an even more significant decline, falling nearly 14% after triggering circuit breakers designed to prevent market free-falls.

South Korea’s market vulnerability stems from its heavy dependence on trade and fuel imports. Any disruption to maritime traffic through the Strait of Hormuz—the narrow gateway to the Persian Gulf through which approximately one-fifth of globally traded oil passes—poses significant risks to the country’s economy. Market heavyweight Samsung Electronics saw its shares drop 11.7%, while SK Hynix fell 9.6%.

In response to maritime security concerns, President Trump announced that he had ordered the U.S. Development Finance Corporation to provide political risk insurance and guarantees for financial security of all maritime trade. “If necessary, the United States Navy will begin escorting tankers through the Strait of Hormuz, as soon as possible,” Trump stated in a White House message posted on X.

Despite these assurances, oil prices continued their upward trajectory. U.S. benchmark crude oil climbed more than 3.5% to $77.18 per barrel, while Brent crude, the international standard, gained 3.7% to $84.38 per barrel—a 15% increase since the conflict began.

Mizuho Bank noted in a commentary that Trump’s guarantees “only mitigate, but do not eliminate, enduring upside risks to oil prices.” The bank estimated that increased insurance costs for shipping could add $5 to $15 per barrel, emphasizing that the “war premium remains firmly intact.”

Other Asian markets also suffered significant losses. Japan’s Nikkei 225 shed 3.6%, Hong Kong’s Hang Seng fell 2%, and Taiwan’s Taiex lost 4.4%. Australia’s S&P/ASX 200 declined 1.9%, while Bangkok’s market sank 6%.

The market volatility has extended to the United States, where the S&P 500 finished Tuesday with a 0.9% loss after dropping as much as 2.5% earlier in the day. The Dow Jones Industrial Average fell 0.8%, and the Nasdaq composite dropped 1%.

One of the most visible economic impacts has been the surge in gasoline prices. In the U.S., a gallon of regular gasoline was selling for an average of $3.11, up 11 cents according to motor club AAA. While the U.S., as a net oil exporter, does not face a shortage, prices are still influenced by global market dynamics.

In currency markets, the dollar fell to 157.46 Japanese yen from 157.74 yen, while the euro slipped to $1.1604 from $1.1612. Gold prices rose 1.2%, and silver gained 2.6%, reflecting investors’ flight to traditional safe-haven assets amid the uncertainty.

Analysts suggest that stocks could rebound if the conflict resolves quickly. However, a prolonged war could lead to persistent inflation, primarily due to rising energy prices, potentially limiting the Federal Reserve’s ability to cut interest rates and provide economic stimulus.