US Ignites, Japan and South Korea Pay the Price, Asia Hit by "Black Monday"

Why do AI and geopolitical conflicts pose a risk of stagflation for the Asian economy?

On March 23, 2026, Asian financial markets experienced a “bloodbath.”

The Korea KOSPI index plummeted immediately after opening, dropping 6% intraday and triggering the circuit breaker, the largest single-day decline since October 2023. It closed at 5,432.67 points; Japan’s Nikkei 225 index quickly fell by 5%, breaking the 51,000 psychological threshold; Hong Kong’s Hang Seng Index opened down 1.93%, and the Hang Seng Tech Index fell 1.9%. This sudden “Black Monday” can be traced back to the past weekend—when U.S. President Trump issued a 48-hour “final ultimatum” to Iran, which was about to expire, and the Strait of Hormuz, a vital energy lifeline globally, faced the risk of being cut off.

Trump’s “Maximum Pressure” Sparks the Trigger

On Saturday, March 22 (local time), Trump posted on social media, issuing a blunt threat to Tehran: “If Iran does not fully restore navigation through the Strait of Hormuz within 48 hours, the United States will destroy Iran’s power plants without prior notice.” This statement marked a 180-degree turn from the previous mild rhetoric of “gradually ending the war,” signaling that the months-long crisis in the Red Sea was escalating toward a more dangerous direct military confrontation between the U.S. and Iran.

In response to U.S. threats, Iran quickly announced four countermeasures: fully closing the Strait of Hormuz, attacking all energy infrastructure in Israel, destroying all U.S.-owned companies in the Middle East, and attacking power plants in Middle Eastern countries with U.S. military bases. If this strait, which handles about 20% of global oil transportation, is closed, it would immediately cause a structural break in the global energy supply chain.

The Ghost of Stagflation Looms Over East Asian Manufacturing

Unlike past geopolitical conflicts where funds flocked to traditional safe-haven assets like gold, this market panic is driven by a unique “interest rate + inflation” logic. Goldman Sachs raised its oil price forecast for the second time over the weekend, expecting Brent crude to average $110 per barrel in March-April. Market concerns are that any disruption in the Strait of Hormuz will force highly energy-dependent manufacturing economies in Asia to face a surge in “imported inflation,” forcing the Federal Reserve and other central banks into a more difficult choice between “supporting growth” and “controlling inflation.”

This “stagflation” expectation (economic stagnation + high inflation) directly suppresses risk asset prices. South Korea’s finance minister, Koo Yun-cheol, urgently convened a financial stability meeting, acknowledging that the crisis “could become prolonged”; the ruling party quickly announced drafting a supplementary budget of 25 trillion won (about 133 billion RMB) to stabilize the market. Japan’s finance minister also announced an emergency allocation of 800 billion yen to curb domestic gasoline prices, and the Bank of Japan issued a rare warning: if the Strait of Hormuz remains closed for 60 days, Japan’s economy could experience a “temporary contraction.”

The Geopolitical Dilemma: “America Sparks, Asia Pays”

Analysts point out that this sharp decline in Asian stock markets reveals the structural fragility of the current international order: when military conflicts in the Middle East intertwine with U.S. dollar hegemony and oil pricing power, manufacturing giants in the East often become the first “innocent victims” to be affected. “Unlike the yen arbitrage unwind in August 2024 or the tariff crisis in April 2025, the core of this crisis is the physical risk of disruption in geopolitical supply chains,” said a Tokyo market analyst. “Asian economies are facing both imported inflation from soaring energy costs and capital outflows due to the Fed delaying rate cuts amid inflation pressures. This ‘double squeeze’ is more deadly than simple risk-off selling.”

As of press time, the 48-hour deadline set by Trump is counting down. The dark clouds over the Strait of Hormuz are reflected in the sharp red numbers on Asian stock market screens, driven by the fluctuations in crude oil futures prices. This market turmoil, triggered by U.S. unilateral policies, may ultimately be paid for by the global manufacturing hub and ordinary consumers alike.