Crude prices surge past $100 mark, majority of Asian equities decline amid escalating Iran conflict

Oil prices surged above $100 on Monday, while most Asian stocks declined, as the Iran war entered its third week with neither side showing any signs of backing down and diplomats working to secure safe passage for tankers through the Strait of Hormuz.

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Crude prices spiked in the opening minutes after the US president announced that forces had struck military targets on Kharg Island, which handles nearly all of Iran's oil exports, and warned that attacks could expand to energy infrastructure if Iran interferes with transit through Hormuz.

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The US president's warning came after the Strait of Hormuz had been effectively closed since the US-Israel operations began on February 28, and he urged other countries to send warships to keep the waterway open.

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Iran's Fars news agency reported that no oil infrastructure was damaged in the strikes, and the US president later wrote on Truth Social that countries receiving oil through the Hormuz Strait must take care of the passage, with the US offering to help.

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However, Japan stated that it was not considering a maritime security operation at the moment, and Australia announced that it would not send any navy ships to the region.

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The US president claimed that Tehran wanted a deal to end the fighting, but he was not prepared to make one on current terms, without providing further details, while Iran's Foreign Minister Abbas Araghchi said his country was not interested in talks with Washington.

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Araghchi told CBS's "Face The Nation" that Iran had never asked for a ceasefire or negotiation, but he was ready to speak to countries about the safe passage of their vessels, and mentioned that several countries had approached Iran seeking such safe passage.

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The two sides continued to exchange fire on Monday, with Saudi Arabia intercepting over 60 drones since midnight, and flights temporarily suspended at Dubai's airport after a "drone-related incident" sparked a fire nearby.

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Araghchi described Israeli strikes on Tehran fuel depots as "ecocide" due to the long-term risks to residents' health, and traders hoping for an early end to the conflict were left disappointed after the US president's top economics adviser Kevin Hassett said the Pentagon estimates it could take up to six weeks.

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Both main crude contracts advanced, with Brent up around three percent to as high as $106.50 before paring the gains to about $104, and West Texas Intermediate climbing more than two percent to top $100.

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Japan began releasing its strategic oil reserves after the International Energy Agency indicated that the release would start in Asia and Oceania, and IEA members agreed last week to release a record 400 million barrels from stockpiles to cushion the surge in prices caused by the war.

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Equity markets remained under pressure due to worries about a possible energy crisis that could hammer the global economy, with Tokyo, Shanghai, Sydney, Wellington, Taipei, Manila, Mumbai, Bangkok, and Jakarta all declining, while Hong Kong, Seoul, and Singapore rose.

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London, Frankfurt, and Paris rose at the open, and Michael Brown at Pepperstone wrote that the impact of geopolitical events on markets hinges more on when transits through the Strait of Hormuz begin to normalize than when hostilities come to an end.

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Brown added that the longer the Strait is impassable, the tighter commodity supply will become, leading to higher prices and a greater inflationary impulse, and data showing the US gross domestic product expanded 0.7 percent in the fourth quarter added to economic concerns.

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The Federal Reserve's preferred inflation gauge dipped to 2.8 percent in January before energy prices shot higher, and National Australia Bank's Ray Attrill warned that developments over the weekend did not offer any obvious pretext for a less pessimistic start to the new trading week.

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Policy meetings at seven major central banks, including the Fed, Bank of England, and European Central Bank, are scheduled for this week, and any remarks on the impact of the war on their respective economies will be closely followed.

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At around 0815 GMT, key figures included West Texas Intermediate up 2.1 percent at $100.81 per barrel, Brent North Sea Crude up 3.0 percent at $106.20 per barrel, and the Nikkei 225 down 0.1 percent at 53,751.15.