Asian markets fell as Gulf drone attacks pushed up oil prices and bond yields, with the Strait of Hormuz closure raising fears Brent crude could surge to US$130-US$140 per barrel. — Reuters file pic (New users only) It's tax relief season! Get up to RM300 when you save with Versa! Plus, enjoy an additional FREE RM10 when you sign up using code VERSAMM10 with a min. cash-in of RM100 today. T&Cs apply. Monday, 18 May 2026 5:11 PM MYT Nikkei slips, S&P futures down ahead of Nvidia resultsChina economic data disappoints, consumers not buyingOil prices gain on reports of drone attacks in GulfMounting inflation concerns keep bonds on the ropes SYDNEY, May 18 — Asian share ‌markets were on the skids today as fresh drone attacks in the Gulf shoved oil prices and bond yields higher, while the AI euphoria underpinning the tech bull run will be tested by earnings from Nvidia this week.A drone strike caused a fire at a nuclear power plant in the United Arab Emirates, while Saudi Arabia reported intercepting three drones, as US President Donald Trump warned that Iran must act “fast” to reach a deal.Meanwhile, the ‌vital Strait of Hormuz remains closed to all but a trickle of shipping as Tehran tries to formalise its control of the waterway that during normal times carries 20 per cent of the world’s oil trade.“The closure is draining global oil inventories fast,” warned analysts at Capital Economics. “Inventories could reach critical levels by end-June, setting the stage for Brent at US$130-140 (RM369-398) per barrel, if not higher.”“If the strait is closed through year-end and oil stays around US$150 per barrel into 2027, that would push inflation to near 10 per cent in the UK and euro zone, send rates back to their recent peaks and lead to global recession.”Brent was trading up 1.9 per cent at US$111.34 a barrel, while US crude climbed 2.2 per cent to US$107.72 a barrel. Crucially, futures for September climbed above US$100 and December hit a contract high as markets braced for protracted shortages.G7 finance ministers are scheduled to gather in Paris today to discuss the Strait of Hormuz and critical raw material supplies, even as geopolitical differences threaten to test the group’s cohesion.Global bond markets were hammered on Friday on concerns that energy costs would stay high and thus continue to drive inflation.Yields on US 10-year notes hit a 15-month top of 4.631 per cent, having already surged 23 basis points last week. Yields on 30-year bonds reached 5.159 per cent after jumping 18 basis points on the week.Japanese yields hit peaks not seen since 1996 as the government proposed to issue fresh debt to fund a planned extra budget ‌to cushion the economic blow from the US-Israeli war on Iran.Investors in turn feared central banks globally would have to tighten to head off an inflationary spiral and a hike from the Federal ⁠Reserve is now seen as a 50-50 chance this year.Minutes of the Fed’s last meeting ⁠are out on Wednesday and should show how much pressure there was on the committee for a shift to a neutral stance and ⁠away from an easing bias.New Fed Chair Kevin Warsh ⁠will have a chance to air his views at ⁠the G7 meeting and analysts are keen to hear he still favours the rate cuts that Trump so desires.Japan’s Nikkei eased 0.9 per cent, having fallen 2 per cent last week from record highs. South Korean stocks dipped 0.3 per cent, though Samsung Electronics gained after a court issued a partial injunction against a union strike.MSCI’s broadest index of Asia-Pacific shares outside Japan lost 0.8 per cent. Chinese blue chips lost 0.6 per cent, as economic data disappointed. China’s April ⁠retail sales edged up 0.2 per cent when analysts had looked for growth of 2.0 per cent, while industrial output rose a sluggish 4.1 per cent.AI, retail earnings to test the bull runS&P 500 futures fell 0.6 per cent and Nasdaq futures lost 0.7 per cent. For Europe, EUROSTOXX 50 futures and DAX futures both fell 1.0 per cent, while FTSE futures were flat.While Wall Street has been supported by upbeat earnings, analysts at Citi noted that half of the boost to earnings came from one-time items like tariff add-backs and asset mark-ups. Both the gains in profits and the overall indexes were also tightly based.“We identify 20 stocks that contributed the majority of index earnings upside,” analyst Scott Chronert wrote in a note. “Forward guidance increases also show a similar narrow focus.”“Broadening is a necessary condition for meaningful index upside from here,” he added. “This will ⁠require a better line of sight to the Iran conflict wind-down.”Rising yields also push up borrowing costs for the US government and home buyers, a negative for the budget deficit and housing markets. They also mean a higher discount for future company earnings, challenging stock valuations.The all-important AI trade will be tested by earnings from Nvidia that are ⁠due on Wednesday, where expectations are sky-high for the world’s most valuable company.Nvidia shares are up 36 per cent since a March low, while the Philadelphia SE semiconductor index has surged more than 60 per cent, amid voracious demand ⁠for chips as tech ⁠companies spend massively to build AI-related infrastructure.Also due this week are results from a host of retailers led by Walmart, which will provide an insight into how consumers are faring with high energy prices.In forex markets, risk aversion has tended to benefit the greenback as the world’s most liquid currency. The US is also a net energy exporter, giving it a relative advantage over Europe and much of Asia.The euro sat at US$1.1618 after losing 1.4 per cent last week. ‌The pound wallowed at US$1.3311, having dived 2.3 per cent last week as political instability added to already intense pressure on the gilt market.The dollar held firm against the yen at 158.91, with only the threat of Japanese intervention preventing another speculative assault on the 160.00 chart barrier.In commodity markets, gold idled at US$4,544 an ounce, having drawn little support so far as a safe haven or as a hedge against inflation risks. — Reuters