Tensions between the US and Iran are rattling Asian markets as investors brace for potential disruptions to global oil supplies. The latest escalation in diplomatic hostilities has sent crude prices surging, with Brent crude climbing above $85 per barrel. Market participants across Tokyo, Hong Kong, and Singapore are closely monitoring developments as geopolitical risk premiums return to energy markets.

Asian equities are feeling the pressure, with major indices in Japan and South Korea posting losses in early trading. The Nikkei 225 fell 1.2% as exporters face headwinds from a stronger yen and rising energy costs. Investors are rotating into safe-haven assets, driving Japanese government bond yields lower and boosting demand for gold. The flight to safety reflects growing concerns about the potential for supply chain disruptions if tensions escalate further.

The market reaction underscores Asia's vulnerability to Middle East tensions, given the region's heavy reliance on oil imports. China and India, the world's largest oil importers, are particularly exposed to price volatility. Traders are now pricing in a higher probability of sustained elevated oil prices, which could complicate central banks' inflation-fighting efforts across the region.