Asian stocks fell in early trading on Friday, following U.S. stocks, with market focus on oil prices amid growing concerns that a war with Iran would further restrict energy supplies and push up inflation.

Asian benchmark stocks fell 0.5% in early trading, after the S&P 500 fell 1.5%, hitting its lowest level since November last year. Even investors who had turned to seemingly safe U.S. large-cap tech stocks felt the impact, with the Nasdaq 100 falling 1.7% on Thursday and large-cap tech indices nearing correction thresholds. U.S. stock index futures opened higher, indicating some signs of market easing.

Oil prices edged lower on Friday after climbing to their highest closing price since August 2022. U.S. President Donald Trump and Iran’s new supreme leader both made strong statements, with the latter saying the Strait of Hormuz should remain closed.

Goldman Sachs warned that if oil flows through the Strait of Hormuz remain low into March, oil prices could surpass their 2008 peak. Brent crude oil prices surged to a high of $147.50 per barrel that year. The International Energy Agency stated that the war with Iran is causing unprecedented volatility in the oil market, affecting 7.5% of global oil supply and a wider range of oil exports.

In early trading on Friday, U.S. Treasury prices stabilized after falling across all maturities the previous session due to heightened inflation concerns. Traders have now abandoned expectations of a Federal Reserve rate cut in 2026. The yield on the policy-sensitive two-year U.S. Treasury note rose 9 basis points to 3.74% on Thursday, while the yield on the ten-year Treasury note rose 3 basis points to 4.26%.

The dollar index edged lower on Friday after closing at its highest level in nearly two months.

Traders will also be closely watching U.S. inflation data released later, although given geopolitical uncertainty, this retrospective indicator is unlikely to have a significant impact on investor sentiment.

Trump posted on social media that preventing Iran from acquiring nuclear weapons and threatening the Middle East is “far more important and meaningful to me than oil prices.”

With the market widely expecting the Federal Reserve to keep interest rates unchanged next week, investors will be closely watching any changes in its outlook, especially after Trump again called for a rate cut.

“The most hawkish outcome would have been for the Fed to remove its dovish bias in its statement, while the market median expectation shifted from one rate cut this year to no change,” said Stephen Brown of Capital Economics.

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