Oil nears $110 per barrel, stocks tumble as Middle East crisis deepens

Asian markets plummeted on Friday as oil prices surged and bond yields hit multi-year peaks due to escalating tensions in the Middle East. The crisis, involving the US and Iran, has raised concerns about oil supply, while a US inflation report has heightened expectations for more rate hikes. Crude prices have jumped over 30 percent in a week, with Brent oil flirting with the $110 per barrel mark, its highest since May.

The US benchmark West Texas Intermediate also hit over $104 per barrel, last seen around the same time. The conflict has forced Yemen's Houthis to target several Saudi Arabian energy sites, potentially disrupting a vital alternative energy route. Brent oil nearly reached $110 per barrel, and West Texas Intermediate peaked at over $104, last seen around the same time.

As the war shows no signs of ending, investors are bracing for further inflation, putting pressure on central banks to tighten monetary policy. The 30-year Treasury yield soared to 5.36 percent, a new post-2007 peak, while the 10-year yield neared five percent and a 19-year high. The European Central Bank raised rates and warned of persistent price rises, while markets watch the Federal Reserve's upcoming policy meeting.

The US consumer price index release is expected to further fuel rate hike speculation, with a more than 70 percent chance of a quarter-point increase. The combination of soaring oil prices, rising inflation expectations, and ongoing hostilities is causing risk assets to suffer. Wall Street indexes declined sharply, and European and Asian markets followed suit.

The dollar strengthened against the yen as expectations of higher US interest rates grew. Prolonged hostilities in the Middle East are increasingly becoming a permanent factor in the energy market, putting upward pressure on prices.