Asian Indices Forecast: Oil Shock Hits Nikkei, Hang Seng, ASX 200

March was a rough month for Asian stock markets. The war between the U.S., Israel and Iran sent oil prices surging and investors running for cover. Higher energy costs raised fears about inflation and slower growth, and that was enough to push stocks lower across the region.

Japan, Hong Kong and Australia all finished the month in the red. Each market had its own story, but the war was the common thread. Japan reversed sharply from record highs. Hong Kong was already struggling with China’s economic problems, and the war made it worse. Australia sold off broadly even though its energy stocks benefited from higher oil prices.

As April gets underway, traders have one eye on the Strait of Hormuz and the other on central bank policy.

Ahmed Yousre, Global Market Strategist at PU Prime commented:

Crude oil prices have entered a sharp corrective phase following the announcement of a 14-day ceasefire between the United States and Iran, marking a decisive shift in market sentiment. After a period of aggressive upside driven by geopolitical risk premium, the market is now rapidly repricing as the probability of supply disruption declines.

The key catalyst is the conditional reopening of the Strait of Hormuz, a critical artery accounting for roughly 20% of global oil flows. With both sides signaling willingness to engage in further negotiations—despite ongoing accusations of ceasefire violations—the immediate tail risk of supply shock has eased significantly. This has triggered a broad unwinding of long positions, leading to a decline of more than 15% in crude prices.

From a macro perspective, this transition reflects a classic shift from “fear pricing” to “normalization pricing.” As geopolitical tensions temporarily de-escalate, the embedded risk premium in energy markets is being stripped out. However, given the fragile and time-bound nature of the ceasefire, volatility is likely to remain elevated, with markets highly sensitive to any breakdown in diplomatic progress.

Near-term downside risks remain dominant as long as supply routes continue to normalize. Any sustained recovery in oil would require a clear re-escalation in tensions or confirmation that the ceasefire is failing—neither of which is currently the base case.

Oil Shock Drove the March Selloff

The Middle East war was the only story that mattered in March. Brent crude closed near $114 to $118 per barrel at the end of March, up roughly 50% for the month. Oil doesn’t stay an oil story when it moves that fast. Inflation forecasts moved higher. Growth estimates moved lower. Central banks had to rethink their plans. Investors didn’t stick around to see what came next. Stocks got sold, volatility picked up and the Strait of Hormuz became the most watched piece of geography on the planet. Every headline out of the Middle East moved markets. March was that kind of month.

March performance in Brent crude oil. Source: TradingView

Japan’s Nikkei 225 Drops 11%

The Nikkei 225 hit record highs near 60,000 in late February, then ran straight into the war. By March 31 it was sitting at 51,063.72. That’s an 11% to 13% drop in one month. The index had some ugly sessions along the way, including a single-day loss of more than 5% on March 9. Foreign buyers who had been driving the rally earlier in the year started heading for the exits. Japan imports almost all of its energy, so the oil surge hit the domestic economy hard. The yen’s weakness normally gives exporters a lift, but the selling pressure from oil prices and geopolitical risk was too much to offset.

Daily Nikkei 225 chart for March 2026. Source: TradingView

Hong Kong’s Hang Seng Remained Under Pressure

The Hang Seng closed at 24,818.20 on March 31, down 6% to 7.5% for the month. It spent most of March trading between 24,000 and 26,000 and couldn’t hold any short-term gains. China’s property sector is still a problem, and the big tech names are struggling with softer earnings. The global risk-off environment made every bounce a selling opportunity. Rallies came and went, but none of them held and the downtrend stayed intact. Without a clear catalyst from Beijing in the form of fresh stimulus or better economic data, the Hang Seng is likely to remain under pressure.

Daily Hang Seng Index chart for March 2026. Source: TradingView

Australia’s ASX 200 Posted Its Worst Month Since 2022

The S&P/ASX 200 closed at 8,481.80 on March 31, down 7.5% to 7.8% for the month. That’s its worst monthly performance since 2022. The selling was broad. Financials, consumer stocks and rate-sensitive sectors all took hits. Energy and mining names held up better because of the surge in oil and commodity prices, but those gains weren’t enough to offset the losses everywhere else. Higher energy costs are already adding pressure on domestic growth, and the Reserve Bank of Australia is now in a tough spot on rates. The question heading into April is whether energy and resource stocks can keep outperforming while the rest of the market struggles.

Daily Australia 200 cash chart for March 2026. Source: TradingView

Central Banks Face an Inflation-Growth Bind

The Bank of Japan didn’t move on rates in March. It maintained a cautious approach to policy normalization even as inflation pressures built. The weaker yen gave exporters some relief, but it wasn’t enough to stop the broader selloff. In Australia, the Reserve Bank is stuck. Inflation is rising because of energy costs, but growth is slowing at the same time. That’s not an easy place to be when deciding whether to raise or hold rates. Higher global yields tightened financial conditions and made a tough decision even tougher. Hong Kong’s currency peg held, but stocks still sold off as global capital headed for the exits.

April Hinges on the Strait of Hormuz

April comes down to one question: Does the Middle East situation get better or worse? The Strait of Hormuz is the key. Stabilize the shipping routes and bring oil down, and these markets bounce back. If the conflict escalates and energy infrastructure takes more damage, oil goes higher and the risk-off environment extends.

For the Hang Seng, a recovery will depend on improved economic data from China or additional policy support from Beijing. Without a clear catalyst, rallies are going to keep getting sold. For the ASX, energy and mining stocks should continue to benefit from high commodity prices, but the broader market remains sensitive to rising costs and any signs of slowing domestic demand.

No Clear Path Forward

The war is still the dominant force across all three markets. An escalation means more volatility and more selling. Right now the war is calling the shots, and that’s not likely to change until there is a real breakthrough on the ground or at the negotiating table.