Emerging Asian markets stumbled on Monday as geopolitical tensions in Iran escalated, triggering a six-month high in oil prices and prompting broad declines in equities and currencies. Investors fled risk-sensitive assets amid fears of supply disruptions, with benchmark indices in key economies shedding 2-4% as the region’s energy-dependent economies faced renewed pressure.

Oil prices surged past $85 a barrel on Monday, their highest level since March, as concerns over potential Iranian sanctions and regional instability disrupted global supply chains. The rally in crude underscored vulnerabilities in emerging markets, where many economies rely on imported fuels and face tight monetary policies to curb inflation. Central banks in Indonesia and Malaysia, for instance, have already raised interest rates this year, tightening financial conditions.

The selloff reflects a broader risk-off sentiment, with MSCI’s Emerging Markets Index plunging 3.2% amid safe-haven inflows into U.S. Treasuries. Analysts warn that prolonged volatility in the Middle East could derail fragile recovery efforts in regions like Southeast Asia, where growth hinges on stable energy imports. Currency markets were particularly hard hit, with the Thai baht and Malaysian ringgit depreciating over 3% against the dollar.

While markets await clarity on diplomatic efforts to de-escalate tensions, the immediate fallout highlights how geopolitical shocks continue to act as a multiplier for economic fragility. Investors are now pricing in higher oil costs for the foreseeable future, complicating efforts to stabilize EM growth trajectories.