Asia is heavily dependent on energy imports shipped through the near‑shuttered Strait of Hormuz and nowhere was the strain clearer than in Seoul, where the session finished with the market plunging 12 percent, the largest drop on record.

Over two days the benchmark has lost more than 18 percent of its value while the currency has slumped to a 17-year low.

Japan's Nikkei fell 3.9 percent and Taiwan stocks dropped 4.3 percent as investors raced out of what has been one of the hottest bets of the last few months in semiconductor makers - likely as cover for losses elsewhere and to cut down on risks.

"Asia's selloff is turning disorderly because markets are no longer treating this as a 'one-week headline shock,' said Charu Chanana, chief investment strategist at Saxo in Singapore.

"The 'sell-what-you-can' phase is spreading."

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Goldman Sachs CEO David Solomon said he'd been surprised at markets' "benign" reaction up to now to the building risks.

"There's a cumulative effect of everything that's happening and a much harsher reaction. Up to this point, we haven't seen that cumulative effect," he said in a speech in Sydney.

"I think it's gonna take a couple of weeks for markets to really digest the implications of what has happened both in the short term and medium term, and I can't speculate as to how that would play out," he said.

Rate cuts in question

Benchmark Brent crude oil futures were on the rise and up more than 13 percent for the week at $82.08 a barrel, though prices have come off highs since US President Donald Trump ordered an insurance guarantee on Gulf shipping and said the navy may escort oil tankers through the Strait of Hormuz.

US and Israeli forces have pounded Iran since Saturday and Iranian drones and missiles have struck Gulf oil refineries and also US embassies in Saudi Arabia and Kuwait.

"Oil infrastructure seems to be under attack [...] so people are having to think about what is the duration of all of that," said Damien Boey, portfolio strategist at Wilson Asset Management in Sydney.

Bond markets, after an initial rally, are now under pressure as investors bet higher oil prices will stoke inflation and delay rate cuts. Traders now see the Federal Reserve as more likely than not to hold rates in June.

"For the United States, this is very clearly inflationary...so the market's reassessing whether the Fed can actually deliver any rate cuts at all this year," said Andrew Lilley, chief rates strategist for Australian investment bank Barrenjoey.

Dash for cash

That's left cash as the beneficiary, with flow rushing in to money-market funds from riskier bets. Even gold took a hit overnight, along with the Australian dollar, which was still under pressure as investors close winning trades.

Gold steadied at $5,163 per ounce in Asia, while the Aussie dipped just below 70 cents. Overnight on Wall Street, indexes pared heavier losses and the S&P 500 closed 0.8 percent lower.

The euro was pinned at $1.16 by higher energy costs. Benchmark European gas prices have jumped about 66 percent in two days.

Coal prices are also starting to move in response to the energy crunch, with Australia's benchmark Newcastle price up almost 17 percent this week.

"For markets to find a floor, we need signs of de-escalation on the war front or status quo, which could then move the focus back to fundamentals," said Rupal Agarwal, Asia quant strategist at Bernstein in Singapore.

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