Oil climbs as stocks slide on fresh Trump warning over Iran

Oil prices surged on Tuesday as concerns grew over a potential escalation of military exchanges between the United States and Iran. The recent flare-up at the weekend, coupled with President Donald Trump's warning that Iran would face "hard" responses, has exacerbated fears of inflation that have pressured central banks to raise interest rates.

As a result, stock markets have suffered. The conflict remains stalled, with Iran maintaining control of the Strait of Hormuz and the US continuing a counter-blockade of Iranian ports. On Sunday, the US launched strikes on an Iranian island in the waterway, and Iran retaliated by attacking US military targets in the Middle East.

The exchange increased the likelihood of renewed major hostilities, prompting Trump to vow a "hard" response. US officials confirmed that the US targeted rocket launchers on the island of Larak to prevent Tehran from planting mines in the strait, while Iran retaliated by attacking US forces in Jordan and the United Arab Emirates.

Following weeks of relative calm, the exchange of fire has heightened the vulnerability of the situation to further escalation. US Treasury Secretary Scott Bessent stated that the government plans to continue exerting pressure, with a potential turning point occurring within weeks or months. The US president is set to meet with oil refining executives to address the issue of soaring US domestic gas prices, which have been a political challenge for his party leading into the November midterm elections.

Stocks generally declined, with traders anticipating important economic data releases this month ahead of the Federal Reserve's policy meeting on September 16. Major Asian stock markets were mostly down, except for Taipei, Manila, and Jakarta, which experienced gains. The anticipation of inflation and rising borrowing costs pushed the yield on 10-year US Treasuries to their highest level since January 2025, impacting Asian markets as well.

In company news, fast-fashion giant Shein saw its shares fall by more than nine percent following its Hong Kong IPO, while MediaTek experienced a nearly 10 percent surge after US tech giant Nvidia invested $3.5 billion in the Taiwanese chipmaker.