Trump’s threat to hit Iran ‘extremely hard’ jolts Asian stocks, U.S. futures and oil

U.S. President Donald Trump said the U.S. will hit Iran “extremely hard” over the next two or three weeks in a national address on Wednesday.

“We’re going to hit them extremely hard over the next two to three weeks,” he said. “We’re going to bring them back to the stone ages, where they belong.”

But the first targets to bear the brunt of the president’s “Epic Fury,” Washington’s name for the Iran operation, were Asian stocks, U.S. Treasuries and oil prices.

Shortly after his 19-minute speech, Asian markets reversed earlier gains from Thursday’s session, as benchmarks in Australia, Japan and South Korea fell. South Korea’s Kospi plunged 4.37%, leading losses in the region.

The Hong Kong and mainland Chinese markets, which opened their sessions shortly after his speech, started the day in negative territory.

U.S. stock futures were down over 1% for all three major indexes after trading flat earlier in the session.

U.S. Treasury yields climbed after Trump’s speech, signaling a sell-off in the bond market, with the yield on the benchmark 10-year notes climbing 6 basis points to 4.38%.

In currencies, the U.S. dollar index rose 0.37% to 100.02, reversing earlier losses.

The Japanese yen weakened 0.38% to 159.37 against the greenback, while the South Korean won fell 0.6% to 1,521.80. Both currencies had strengthened earlier in the session.

The dollar also strengthened against other major currencies, with the Euro trading at 1.153, while the pound fell 0.57% to 1.32 against the U.S. dollar.

Spot gold prices slipped 1.82% to 4,671,67.

Oil prices saw the largest swings after Trump’s speech, with Brent crude futures jumping 5.37% to $106.59 a barrel while U.S. West Texas Intermediate rose 4.51% to $104.64.

Despite Trump’s claim that the U.S. has almost met all its objectives, analysts said his threat to hit Iran “extremely hard” could still send oil prices higher.

“Trump is declaring mission almost accomplished, but highlighting further escalation in the next few weeks, which increases the risk of more extensive damage to regional energy infrastructure both in Iran but throughout the Gulf, ” Rachel Ziemba, founder of Ziemba Insights, told CNBC’s “The China Connection.”

Early Wednesday stateside, Trump claimed that Iran’s “New Regime President” had asked the U.S. for a ceasefire, a claim that Tehran has denied.

Trump added that the U.S. will “consider” the request only once the Strait of Hormuz is “open, free, and clear,” he said on Truth Social, fueling expectations that the war could drag on longer.

“Remember — the longer this war lasts, the longer the energy disruption from the [Strait of Hormuz] continues and the greater the risk of elevated energy prices,” said Chetan Seth, APAC Equity Strategist at Nomura. “It’s not over until it’s over.”

Seth added that risk markets such as equities are “not surprisingly disappointed,” especially after the excitement of the past couple of days.

Earlier this week, Trump had signaled that the U.S. could leave Iran, even without the Strait of Hormuz being opened, raising hopes for an end to the conflict. Markets then staged a rally over the past two days.

“Markets reacted negatively because, while Trump says it is nearly over, he is sending the third aircraft carrier and more troops to the region so it is hard to believe his words,” Alicia Garcia Herrero, Chief Economist for Asia Pacific at Natixis told CNBC.

The U.S. earlier this week reportedly deployed the Nimitz-class aircraft carrier USS George H.W. Bush and its accompanying warships to the region. Washington had earlier stationed the carriers USS Abraham Lincoln and USS Gerald R. Ford to the region to support its operations against Iran.

“I think [a] further escalation is still the more likely scenario,” she added.