Asian shares decline as hopes dim for resolution in Iran

South Korea’s Kospi dove 6.5% to 5,404.77. Hong Kong’s Hang Seng slipped 4.0% to 24,279.23, while the Shanghai Composite declined 3.7% to 3,811.62.

Mr. Trump over the weekend warned the U.S. will “obliterate” Iran’s power plants if it doesn’t fully open the Strait of Hormuz within 48 hours, prompting Tehran to say it would respond to any such strike with attacks on U.S. and Israeli energy and infrastructure assets in the region.

Also read: Iran-Israel war LIVE

“Trump’s ultimatum and Iran’s retaliatory warnings point to a widening conflict that keeps energy disruption and market volatility elevated with no clear off-ramp in sight,” said Ng Jing Wen, analyst at Mizuho Bank in Singapore.

Higher oil prices, which also shook stock markets on Friday, dashed hopes for a possible upcoming cut to interest rates by the Federal Reserve, analysts said.

Before the war, traders were betting that the Fed would cut rates at least twice this year. Central banks in Europe, Japan and the United Kingdom also recently held their interest rates steady.

In energy trading, benchmark U.S. crude added $1.76 to $99.99 a barrel. Brent crude, the international standard, gained $1.15 to $113.34 a barrel. The price of Brent crude has zigzagged lately from about $70 per barrel before the war began to as high as $119.50.

In the bond market, the yield on the 10-year Treasury finished last week with a jump to 4.38% Friday from 4.2% late Thursday and from just 3.97% before the war started.

The two-year Treasury yield, which more closely tracks expectations for what the Fed might do, rose to 3.88% from 3.79%.

In currency trading, the U.S. dollar rose to 159.53 Japanese yen from 159.22 yen. The euro cost $1.1526, down from $1.1571.