Asian Stocks Slide as Oil Surge, U.S.-Iran Tensions and Fed Rate Bets Weigh on Markets

Asian stock markets extended losses on Tuesday as escalating tensions between the United States and Iran sent oil prices close to one-month highs, fueling fresh inflation concerns and dampening expectations for lower global interest rates. Investors also remained cautious ahead of the release of key U.S. consumer inflation data, which could shape the Federal Reserve's next policy decision.

U.S. stock futures edged lower during Asian trading after Wall Street posted steep losses overnight, reflecting growing concerns over geopolitical risks and tighter monetary policy.

Crude oil prices continued to climb after surging nearly 10% in the previous session. The rally followed President Donald Trump's announcement that the United States would reinstate a blockade on Iranian shipping and impose a 20% fee on cargo moving through the Strait of Hormuz. Renewed U.S. military strikes on Iran further heightened fears of disruptions to global oil supplies, pushing energy prices higher.

The spike in oil prices revived worries that inflation could remain stubbornly elevated, prompting traders to reduce expectations for interest rate cuts. Market participants also increased bets that the Federal Reserve could raise interest rates later this month after hawkish remarks from Fed Governor Christopher Waller.

South Korea's KOSPI dropped 2.5%, extending Monday's sharp losses as semiconductor stocks remained under pressure following a steep overnight decline in U.S.-listed shares of SK hynix. Japan's Nikkei 225 fell 1%, while the broader TOPIX index traded little changed.

Chinese equities were more resilient. The Shanghai Composite was largely flat, while the CSI 300 gained 0.5%. Hong Kong's Hang Seng Index also traded near unchanged levels.

Meanwhile, official data showed China's exports and imports grew faster than expected in June, supported by strong global demand for artificial intelligence-related products and technology goods despite ongoing geopolitical uncertainty.

Elsewhere, Australia's S&P/ASX 200 fell 0.5%, Singapore's Straits Times Index lost 1%, and futures linked to India's Nifty 50 were little changed.

Investors are now closely watching the upcoming U.S. Consumer Price Index report, which is expected to provide critical insight into inflation trends and the Federal Reserve's interest rate outlook, while continued developments in the Middle East remain a major driver of global market sentiment.