Asian stocks drop as war drags on, crude oil falls

Published Fri, Mar 6, 2026 · 10:04 AM

ASIAN equities fell on Friday, leaving markets on track for their steepest weekly loss in six years as the protracted Middle East conflict and renewed Iranian strikes drove a broad retreat in risk assets. Oil edged lower at the open.

Stocks fell in Japan and Australia, pulling the broader MSCI Asia Pacific Index down 0.5 per cent. The gauge has declined about 7 per cent since the war began.

Treasuries dropped and the dollar gained during the US session, with the currency set for its best week since 2024. US equity gauges also dropped on Thursday, although they were off the session lows.

Attention was mostly on oil, with West Texas Intermediate crude dropping as much as 2.5 per cent to almost US$79 a barrel on Friday. That came after the Trump administration was weighing a range of options for addressing the spike in oil and petrol prices amid the war in Iran, Interior Secretary Doug Burgum said. Still, oil is headed for the biggest weekly surge since 2022.

The ongoing US-Israeli offensive against Iran has jolted global energy markets, pushing US crude to multi-year highs amid concerns that disruptions through the Strait of Hormuz may constrain supplies.

The conflict is already unsettling flows to key buyers, with top importer China moving to conserve fuel, heightening inflation risks and market volatility if the fighting persists.

“What matters now is whether the war will last days, weeks, or longer,” said Marco Oviedo, senior strategist at XP Investimentos. The possibility that the conflict doesn’t last long “remains the base case, and that the US is winning the battle. But Iran’s refusal to back down is keeping things tense.”

Iran launched a fresh wave of missile and drone strikes across the Gulf on Thursday evening, with attacks reported in the United Arab Emirates, Bahrain, Qatar and Kuwait. Iranian Foreign Minister Abbas Araghchi told NBC News that his country hadn’t asked for a ceasefire and had no intention of negotiating.

However, the US remains defiant. Trump told Axios he should be involved in selecting a successor, the outlet reported, citing an interview with the president.

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Higher oil prices raised the risk of another breakdown in stock-bond correlations, but bonds can still diversify equity risk, according to Morgan Stanley strategists including Serena Tang.

“If a sustained oil shock could push growth lower and inflation higher, we may see a repeat of the 2021–2023 environment when stocks and bonds sold off together,” they said.

Meanwhile, the US issued a general license to allow for some Russian oil sales to India, giving the nation more options to purchase fuel as the war on Iran leads to a spike in global prices. 

There was no respite for bonds, with Treasuries selling across the curve on Thursday on concerns that higher oil prices will fuel inflationary pressures that could hinder the Federal Reserve’s ability to cut rates.

Attention later today will shift to the US payrolls report. Before that, data showed jobless claims are settling near some of the lowest levels in the last year amid a low-firing environment. 

The employment report due Friday is expected to show hiring moderated last month after a strong reading in January, and unemployment held steady.

“The stronger the better given the increase in inflation expectations due to energy prices,” the JPMorgan Market Intelligence desk led by Andrew Tyler said. “A weaker number will increase rate cut expectations, but the risk is stagflation in the near term.” BLOOMBERG