SYDNEY: Stock markets slumped in Asia on Monday as investors dug in for a protracted Gulf conflict that already has oil prices heading for a record monthly rise, bringing a spike in inflation and the risk of recession to much of the globe.

The Financial Times on Sunday quoted President Donald Trump saying the U.S. could seize Kharg Island in the Persian Gulf, from where Iran exports much of its oil, but also that a ceasefire could come quickly.

Pakistan said it was preparing to host “meaningful talks” to end the conflict over ‌Iran in coming days ⁠even though ⁠Tehran earlier accused Washington of preparing a land assault as the U.S. military sends more troops to the region.

Yemen’s Iran-aligned Houthis also launched their first attacks on Israel since the start of the conflict.

“Iran’s control of the Strait of Hormuz, capacity to disrupt global energy and food markets, and sustained missile and drone capabilities give it little incentive to concede, pressuring the U.S. to escalate,” said Madison Cartwright, senior geo-economics analyst at Commonwealth Bank of Australia.

“We expect the war to run at least into June, with the risk tilted to a longer conflict.”
The clampdown on the Strait has sent prices for oil, gas, fertiliser, plastic and aluminium surging, along with fuel for planes and shipping. Prices for food, pharmaceuticals and petrochemical products are all set to rise. That is bad news for Asia, as much of the region is highly dependent on energy from the ⁠Middle East. ‌Japan’s Nikkei shed another 4.7%, bringing losses for March to almost 14%.

South Korea’s market fell 4.2%, while MSCI’s broadest index of Asia-Pacific shares outside Japan dropped 1.2%.

S&P 500 futures lost 0.7%, while Nasdaq futures fell 0.9%. For Europe, EUROSTOXX 50 futures and DAX futures both slid 1.5%, while FTSE futures fell ⁠1.0%.

Brent crude rose 3.0% to $115.98 a barrel, bringing its gains for the month to 60% and topping the jump that followed Iraq’s invasion of Kuwait in 1990. U.S. crude climbed 3.0% to $102.52, making a monthly rise of 53%.

“The longer the Strait remains closed, the sharper the drawdown in buffer supplies that could spark dramatic increases in the price of crude oil, natural gas and other commodities,” warned Bruce Kasman, global head of economics at JPMorgan.

“A scenario in which the Strait remains closed for an additional month would be consistent with oil prices rising towards $150/bbl and constraints on industrial consumers of energy supply.”

FED IN FOCUS AS PAYROLLS LOOM
The inflationary threat has led investors to revise up the outlook for interest rates almost everywhere. Markets now imply 12 basis points of tightening by the Federal Reserve this year, compared with 50 basis points of cuts a month ago.

Fed Chair Jerome Powell will have a ‌chance to air his own views at an event later on Monday, and the influential head of the New York Fed, John Williams, is also talking.

Data on U.S. retail sales, manufacturing and payrolls this week will provide an update on how the economy is travelling. Jobs are seen rising 55,000 in March, after February’s shock 92,000 drop, keeping unemployment ⁠at 4.4%.

In the European Union, figures on Tuesday are forecast to show annual inflation leaped to 2.7% in March from 1.9% the month before, though core prices should be steadier.

The energy shock, combined with pressure on fiscal budgets from higher borrowing costs and the need for more defence spending, has slugged sovereign bond markets.

Ten-year U.S. Treasury yields are up roughly 47 basis points for the month so far at 4.428%, while two-year yields have climbed 54 basis points.

Heightened volatility in markets has tended to benefit the U.S. dollar as the world’s most liquid currency. The United States is also a net energy exporter, giving it a relative advantage over Europe and much of Asia.

The dollar was holding at 160.12 yen, having last week crossed the 160 barrier for the first time since July 2024 when Japan last intervened to prop up the currency.

The euro was stuck at $1.1500, not far from the March trough of $1.1409.

In commodity markets, gold was down 1.0% at $4,445 an ounce , having drawn scant support as a safe haven or as a hedge against inflation risks.

A nationwide recall has been issued for two chocolate products after they were found to contain undeclared prescription drug ingredients, federal health officials warn.

California-based Gear Isle is voluntarily recalling certain units of its “Gold Lion Aphrodisiac Chocolate” and “ilum Sex Chocolate” after testing revealed the presence of sildenafil and tadalafil — active ingredients commonly used in erectile dysfunction medications, according to a Thursday announcement from the U.S. Food and Drug Administration (FDA).

The products were sold online across the U.S. and marketed as dietary supplements.

CHOCOLATE CANDY SOLD AT LIDL RECALLED OVER UNDECLARED HAZELNUT ALLERGEN

The FDA warned that the undeclared ingredients could pose serious health risks, particularly for people taking nitrate medications for heart conditions. 

The combination can cause a sudden and potentially “life-threatening” drop in blood pressure, according to the FDA.

“Among the adult male population who are most likely to use these products, adult males who use nitrates for cardiac conditions are most at risk from these products,” the announcement noted.

ALDI RECALLS POPULAR SNACK FOOD OVER POSSIBLE RODENT HAIR CONTAMINATION

The recall covers:

• Gold Lion Aphrodisiac Chocolate Male Enhancement Sachet (UPC: 795847916279, exp. June 2027)
• ilum Sex Chocolate Male Sexual Enhancement Booster (UPC: 1002448578911, exp. Dec. 25, 2027)

Gear Isle said it has not received any reports of adverse events tied to the products.

Consumers are urged to stop using the products immediately and return them for a refund. 

HERBAL SUPPLEMENT FOUND TO CONTAIN HIDDEN VIAGRA INGREDIENT, FDA URGES CONSUMERS TO STOP USE

Anyone experiencing symptoms should contact a healthcare provider, according to the FDA.

The recall follows a similar action earlier this month, when New Mexico-based Primal Supplements Group LLC voluntarily recalled certain units of its Primal Herbs “Volume” sexual enhancement product after it was also found to contain sildenafil, according to the FDA.

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Gear Isle did not immediately respond to FOX Business’ request for comment.

US stocks tumbled on Friday, with each ‌of the three major US indexes closing at their lowest levels in over seven months and the Dow confirming it was in correction territory as the month-long Middle East war continued to suppress ‌risk appetite.