Asian stocks decline on Trump's tariffs, US-Iran tension; South Korea's KOSPI underperform

Asian stock markets fell across the board on Friday as intensifying US-Iran conflict and US President Donald Trump's new tariffs temper investors' appetite for riskier assets. Japan’s Nikkei N225 is down nearly 3% while South Korea's KOSPI declined over 4.5%, underperforming broader markets.

The US military announced that it has completed another round of strikes against Iran on Thursday, marking the 13th straight night of operations. The latest strikes come amid a widening regional confrontation, with Iran and its allies launching retaliatory strikes against US-linked military assets in Kuwait, Bahrain and Jordan.

Moreover, Iran-aligned Houthis extended the Middle East war to a second major shipping chokepoint and struck two Saudi oil tankers in the Red Sea. This exacerbates energy supply disruption concerns amid the closure of the Strait of Hormuz, lifting oil prices to a fresh high since June 11 on Thursday and fueling inflation fears.

Investors remain worried that a fresh inflation shock would force major central banks, including the US Federal Reserve (Fed), to adopt a more hawkish stance. According to the CME Group's FedWatch Tool, traders are currently pricing in around a 93% chance that the US central bank will raise borrowing costs by the end of this year.

Meanwhile, the Trump administration is set to impose sweeping new tariffs ranging from 10% to 12.5% on 60 of the top trading partners, covering nearly all of the country's imports and reigniting fears of a global trade war. This, in turn, is seen as another factor that contributes to a broadly weaker tone across global financial markets.