BEIJING (dpa-AFX) - Asian stocks plummeted on Monday after Washington and Tehran threatened to escalate hostilities.
U.S. President Donald Trump threatened military action against Iran's power plants unless the Strait of Hormuz reopens within 48 hours.
Iran warned it would strike energy and water infrastructure across the Gulf in retaliation if Trump follows through with his threat.
Iranian Parliament Speaker Mohammad Bagher Ghalibaf warned that any attack on Iran's power plants would trigger irreversible damage to regional energy and desalination infrastructure.
Escalating the three-week war, there were also reports of the U.S. weighing a possible ground operation to seize Kharg Island, Iran's primary oil export hub, and preparing for a full-scale ground troop deployment against Iran.
Most Asian currencies weakened while the dollar strengthened due to risk-off sentiment prevailing in the markets.
Benchmark Brent crude futures traded up nearly 3 percent above $109 a barrel in late Asian trade while gold slumped more than 6 percent toward $4,200 an ounce on inflation and rate-hike jitters.
China's Shanghai Composite index tumbled 3.63 percent to 3,813.28 as oil shock from the Middle East fanned stagflation fears. Hong Kong's Hang Seng index slumped 3.54 percent to 24,382.47.
Japanese markets slumped as investors weighed the risks of a worsening regional conflict in the Middle East and abandoned bets on Federal Reserve rate cuts.
The Nikkei average briefly sank over 5 percent before recouping some loss to settle 3.48 percent lower at 51,515.49. The broader Topix index fell 3.41 percent to 3,486.44 as trading resumed after a long holiday weekend.
South Korea's Kospi index crashed 6.49 percent to close at 5,405.75 amid an extended standoff between the United States and Iran over the Strait of Hormuz.
Trading was briefly suspended after the Kospi 200 futures index fell by over 5 percent. Among the prominent decliners, Hyundai Motor, KB Financial, Samsung Electronics and SK Hynix lost 6-7 percent.
Australian markets fell notably on concerns about energy flows, supply chain disruptions and rising inflation triggering higher interest rates.
The benchmark S&P/ASX 200 dropped 0.74 percent to 8,365.90, with banks and heavyweight miners leading losses. The broader All Ordinaries index ended 0.88 percent lower at 8,552.60.
Across the Tasman, New Zealand's benchmark S&P/NZX-50 index ended down 0.69 percent at 12,899.72, after having fallen to over 7-month low earlier.
U.S. stocks fell for a third straight session on Friday as bond yields surged on inflation fears following new attacks on energy infrastructure in the Middle East.
Adding to investor anxiety, CBS reported that Pentagon officials have drawn up detailed preparations for deploying U.S. ground troops into Iran.
Axios reported that the Trump administration is mulling a forced takeover of Iran's Kharg Island, a key oil-export site, to put pressure on Iran to reopen the Strait of Hormuz.
The Wall Street Journal reported that the Pentagon is deploying three more warships and thousands of additional Marines to the Middle East.
Trump suggested in an interview with MS Now's Stephanie Ruhle that the U.S. would continue to attack Iran until they can 'never rebuild.' Trump later told reporters he is not interested in a ceasefire with Iran.
The tech-heavy Nasdaq Composite plummeted 2 percent, the S&P 500 slumped 1.5 percent and the Dow gave up 1 percent to reach their lowest closing levels in over six months.
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