Brent crude closed at $103.14 per barrel on Friday, its highest settlement since 2022, after diplomatic efforts to secure a ceasefire or a framework for reopening the Strait of Hormuz failed to produce results. The IRGC reaffirmed its declaration that the strait was closed, and Brent surged to $114 after Trump’s 48-hour ultimatum expired without a resolution earlier in the week. The price subsequently eased on speculation that indirect negotiations might resume, but the $100 floor appears increasingly entrenched as the physical reality of supply loss catches up with the futures market.
The impact on Asian capital flows has become the most severe since the COVID-19 pandemic. Foreign investors withdrew a record volume of capital from Indian equities in March, as the oil price shock threatened to reverse the RBI’s easing cycle and widen the current account deficit beyond levels that portfolio managers consider sustainable. India’s government has been absorbing fuel price increases rather than passing them to consumers, a fiscal choice that protects near-term spending but widens the deficit and constrains the policy space available for growth-supporting measures. The India growth story, which had been the region’s strongest equity narrative through January and February, is now competing with an energy cost reality that equity valuations had not previously embedded.
Japan’s equity market continued its retreat. The Nikkei 225 has fallen approximately 10% from its February peak, and the “Takaichi trade” that had driven the rally has lost momentum as the energy crisis complicates the fiscal expansion narrative. Brent crude heading for its largest monthly surge on record means that Japan’s energy import bill is expanding at precisely the moment when the government’s spending plans are supposed to stimulate domestic consumption. The yen remained under pressure near 158, caught between the energy import cost dynamic and safe-haven demand that would normally support the currency during geopolitical crises.
The KOSPI has partially stabilized after the March 4 circuit breaker, trading near 5,300, but the year-to-date gain has compressed significantly from the 40%+ peak in late February. Samsung and SK Hynix continue to outperform the broader market, reflecting the resilience of AI memory demand even in a macro environment that has deteriorated sharply. South Korea’s 100 trillion won market stabilization program and naphtha export restrictions have provided some support, but the country’s structural dependence on Gulf crude, with 70% of imports sourced from the Middle East and 95% of that transiting Hormuz, limits the effectiveness of domestic policy measures.
The LNG crisis has deepened further. Iran’s March 18 strike on Qatar’s Ras Laffan facility, which caused an estimated 17% reduction in Qatar’s production capacity, has structural implications that extend far beyond the current conflict. Analysts estimate the damage will require three to five years for full repair, meaning that even a rapid diplomatic resolution to the conflict would not restore pre-war LNG supply levels. Asian LNG spot prices remain elevated by more than 140%, and European gas benchmarks have nearly doubled as the continent faces depleted storage after a harsh winter. The secondary effects on petrochemicals, plastics, and fertilizers are cascading through industrial supply chains across the region.
For investors closing out the month, March 2026 will be recorded as one of the most disruptive periods in Asian market history. The confluence of a record oil supply disruption, the largest emergency reserve release ever attempted, diplomatic failure at multiple levels, and the real-economy impact of fuel shortages reaching consumers across the region’s most populous countries has created a risk environment that demands defensive positioning while maintaining the flexibility to re-engage when resolution materializes. The AI semiconductor cycle, Korean governance reform, and Japanese fiscal expansion remain the structural pillars of the Asian investment case, but they are temporarily suspended beneath an energy crisis that is now the dominant driver of regional asset prices.
