TOKYO: Global shares mostly declined and oil prices surged Tuesday as investors eyed threats to world energy supplies from the Iran war.
US futures also declined, with the contract for the S&P 500 down 1.5percent while that for the Dow Jones Industrial Average fell 1.6percent.
In early European trading, France's CAC 40 dropped 2.2percent to 8,207.10, while in Germany the DAX sank 2.9percent to 23,935.62. Britain's FTSE 100 declined 2.2percent to 10,546.30.
In South Korea, a big energy importer, the Kospi plunged 7.2percent as markets reopened after a holiday on Monday, closing at 5,791.91.
Benchmark US crude rose USD3.24 to USD74.47 a barrel. Brent crude, the international standard, added USD3.56 to USD81.30 a barrel. Oil prices jumped Monday over worries that the war could clog the global flow of crude.
Japan's benchmark Nikkei 225 sank 3.1percent to finish at 56,279.05. Like other resource-poor countries in the region, Japan could be especially hit by the lack of access to the Strait of Hormuz, since much of its oil and natural gas imports are shipped through there.
Analysts say Japan has a sizable stockpile lasting more than 200 days, and so the threat isn't immediate.
Japanese energy stocks plunged, with Eneos Corp. down 3.4percent and Idemitsu Kosan down 3.1percent. Defense-related issues, which have risen recently on expectations of more military spending by Prime Minister Sanae Takaichi, sank back as traders sold to lock in gains from the day before. Mitsubishi Heavy plunged 5.3percent, and IHI lost 4.9percent.
In the rest of the region, Australia's S&P/ASX 200 lost 1.3percent to 9,077.30, while Hong Kong's Hang Seng shed 1.1percent to 25,768.08. The Shanghai Composite index lost 1.4percent to 4,122.68.
Stocks of airlines, including American Airlines, United and Delta, were some of Monday's biggest losers on Wall Street. Higher oil prices threaten their already big fuel bills, while the fighting in the Middle East also has closed airports and left travelers stranded.
The losses cascaded in Asia, with ANA stock down 3.3percent, while Japan Airlines fell 6.4percent. Korean Air declined 10.3percent and Qantas Airways lost 1.8percent.
Despite the retreats in many markets, the reactions to the war have been moderated by the fact that past military conflicts in the Middle East haven't caused long-term declines. For this war to knock down U.S. stocks in a significant and sustained way, the price of oil would perhaps need to jump above USD100 per barrel, according to strategists at Morgan Stanley led by Michael Wilson.
“Since 2000, there have been 22 one-day oil price spikes of more than 10percent,” said Stephen Innes, managing partner at SPI Asset Management. “In other words, energy shocks do not automatically derail equities unless they are severe and sustained. The market is well aware of that playbook.”
On Monday, the S&P 500 fell as much as 1.2percent but finished with a gain of less than 0.1percent. The Dow Jones Industrial Average dipped 0.1percent and the Nasdaq composite rose 0.4percent. Both also recovered from steep early losses.
In currency trading early Tuesday, the US dollar edged up to 157.53 Japanese yen from 157.47 yen. The euro cost USD1.1627, down from USD1.1692.