Global Markets Shaken as US-Iran Conflict Escalates, Triggering Commodity and Bond Selloffs

Geopolitical tensions surged across global markets on Thursday as the US military launched a second consecutive day of airstrikes against targets in Iran. The escalation, which followed accusations by US President Donald Trump that Iran is intentionally delaying negotiations on an interim peace deal, has sparked widespread risk aversion. Investors are increasingly concerned that prolonged conflict in the Middle East will fuel global inflation, prompt central banks to keep interest rates elevated, and ultimately derail economic growth.

The immediate fallout was felt acutely in the commodities sector, where copper prices tumbled to a three-week low. The industrial metal, often viewed as a barometer for global economic health, fell as traders priced in the prospects of stagflationary pressures. Market participants fear that a broader conflict could disrupt supply chains and energy flows, compounding existing inflationary pressures and forcing global monetary authorities to maintain a hawkish stance for longer.

In equity markets, the geopolitical shockwave prompted a wave of caution. Indian equity fund investors have begun adopting a more defensive posture as war risks escalate. While monthly recurring investment plans in India remained steady, showing some underlying resilience among retail investors, institutional flows reflected growing anxiety over global macro stability.

Meanwhile, fixed-income markets in emerging Asia faced renewed pressure. In Indonesia, a severe bond selloff resumed on Thursday, demonstrating that a surprise interest-rate hike by Bank Indonesia earlier in the week has failed to restore market confidence. Investors remain deeply concerned about broader macroeconomic headwinds and capital flight, leaving domestic debt vulnerable to further liquidation.

Adding to the regional market anxiety is a sudden leadership vacuum at the Bank of Japan. The hospitalization of BOJ Governor Kazuo Ueda has injected fresh uncertainty into the central bank's communication strategy ahead of next week's highly anticipated policy meeting. Although market participants remain largely convinced that the BOJ will proceed with an interest rate hike, Ueda's absence has fueled nervousness regarding how the central bank will message its policy trajectory to a highly sensitive market.