The selloff rippled across emerging Asia, where equities and currencies crumbled on Trump’s warning that the US would strike Iran “extremely hard” within weeks while stopping short of any timeline for ending the war. The MSCI gauge of emerging market Asia equities stumbled 2.3%, while the currency index eased 0.2%.
“I can say tonight that we are on track to complete all of America’s military objectives shortly, very shortly,” Trump said in his Wednesday evening speech. “We’re going to hit them extremely hard over the next two to three weeks. We’re going to bring them back to the Stone Ages where they belong.”
Brent crude futures jumped about 5% to $105 per barrel after Trump’s speech, while the dollar index rose 0.4%. The moves further pressured Indian markets already reeling from sustained foreign outflows and a weakening rupee.
“The statement led caution to set in again as Trump doubled down on his stance, without providing clarity on any potential signs of resolution,” said Lavanya Venkateswaran, senior ASEAN economist at OCBC. “The conflict is not ending in the near-term and that real economic pressures continue to build.”
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“President Trump’s statement that ‘we will finish the job in two to three weeks’ cannot be taken at face value since the president has been notoriously inconsistent in all his views. He can change his position anytime,” said Dr. VK Vijayakumar, Chief Investment Strategist at Geojit Investments Limited.The extended conflict threatens fuel supplies through the Strait of Hormuz, a critical artery for Asian energy imports. “Two or three weeks (of the war) could prove challenging for economies in this region considering the incoming fuel shipments through the Straits of Hormuz are only trickling in on a selective basis,” Venkateswaran warned.
South Korea’s KOSPI index demonstrated the whipsaw effect of Trump’s messaging, plunging 4.2% after rising as much as 1.8% earlier in the day. Shares in Singapore opened at a two-week high before falling 0.8%, while Malaysia’s benchmark stock index dropped 1%. Equities in Indonesia and Taiwan declined around 1% and 1.4%, respectively.
“With President Trump’s declaration ‘we are going to hit Iran extremely hard in the next two to three weeks,’ market sentiments have again turned negative,” Vijayakumar said. “Brent crude spiked around 5% to $105 and the US 10-year bond yield again firmed up to 4.36 percent negatively impacting gold and silver prices, though marginally.”
The pressure on India is mounting from multiple fronts. “Meanwhile, FPIs continued selling heavily with a sell figure of Rs 8331 crores on April 1st. The high crude price, the widening trade deficit, the fear of declining remittances and sustained FPI selling are acting cumulatively to put high pressure on the rupee which continues to decline despite RBI’s decisions on restrictions on dollar futures deals,” Vijayakumar noted.
War scenarios: Massive escalation or quick deal?
“By saying core strategic objectives are nearing completion in the Iran War, Trump signals near term finality to the West Asian crisis,” said Garima Kapoor, Deputy Head of Research and Economist at Elara Capital. “In the next 2 to 3 weeks either the escalation could increase substantially including attacks on Iranian power and crude facilities or some deal could be achieved.”
Kapoor noted a potential shift in US strategy. “The focus of the US has moved away from regime change and opening of Hormuz. We believe, as US Iran escalation ends, the cost of insuring vessels passing through Hormuz would come down too, allowing gradual movement of energy to resume in Hormuz.”
However, she cautioned that resolution may be forced by US constraints rather than Iranian capitulation. “So far Iran doesn’t seem to be buckling under any pressure from America, but America’s degrees of freedom are reducing, suggesting limited ability to continue longer. We will see a finality to the war soon.”
“Uncertainty will prevail in the near term with crude oil prices remaining firm, even as hopes have been offered for closure of war within next 2 to 3 weeks,” Kapoor said. “Heightened volatility is likely to persist in the short term.”
Despite the market turmoil, some pockets of resilience emerged. “The March auto numbers reflect great resilience in the sector, and this has the potential to keep auto stocks relatively strong even in an otherwise weak market,” Vijayakumar said.
What brokerages say
Investors are receiving mixed signals from brokerages too. During the day, Nomura downgraded Indian equities to neutral from overweight saying that possibility of elevated energy prices raise risks to earnings and valuations.
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At the same time, Jefferies went on to release another report saying that Nifty valuations are now close to pre-Covid average and 12% discount to the last 5 years, making them look attractive.
“Clearly, expectations of 4-5% earnings cuts have been built here. On an extreme case of close to No earnings growth in FY27, Nifty implied P/E is ~20x, the post Covid average,” it said.