Asian markets experienced a significant decline on Monday amidst growing concerns that Israel’s anticipated ground offensive in Gaza against Hamas might trigger a regional war involving Iran. There are warnings that such developments could lead to surging oil prices, further complicating the efforts of central banks to control inflation.

After a week-long bombing campaign, Israel has positioned a substantial army on the border with Gaza, signaling an expected ground incursion with the objective of rooting out militants following surprise attacks on October 7 that resulted in hundreds of casualties.

The situation escalated as Tel Aviv ordered over a million Palestinians to evacuate the northern part of the territory, intensifying worries about a looming humanitarian crisis.

While President Joe Biden acknowledged Israel’s right to self-defense, he expressed concerns on the “big mistake” of reoccupying the Gaza Strip. Nevertheless, reports suggest that he may visit Israel after being invited by Israeli Prime Minister Benjamin Netanyahu in a recent phone call. Secretary of State Antony Blinken is also scheduled for his second visit since the Hamas attacks.

Amid these developments, there are growing fears that this local conflict might evolve into a regional crisis should Iran, accused of aiding in this month’s attack, become further entangled.

Tapas Strickland from National Australia Bank emphasized, “The key uncertainty is whether a ground operation risks widening the conflict, with markets focused on whether Iran and its allies are drawn into the conflict.”

Jamie Dimon, the CEO of JPMorgan Chase & Co, has already warned of a geopolitical crisis if the situation escalates further, saying, “This may be the most dangerous time the world has seen in decades.”

The ongoing crisis in Ukraine, combined with last week’s attacks on Israel, has far-reaching implications on energy and food markets, global trade, and geopolitical relationships.

These uncertainties weighed heavily on Wall Street stocks, leading to drops in the Nasdaq and S&P 500. Simultaneously, oil prices witnessed a significant increase, rising by nearly six percent.

Despite these challenges, the Dow experienced a modest increase thanks to strong earnings reported by JPMorgan, Citi, and Wells Fargo, driven by elevated interest rates.

In contrast, the Asian markets were all in decline, with Tokyo, Hong Kong, Shanghai, Singapore, Seoul, Taipei, Wellington, and Manila all registering losses. Oil prices, on the other hand, saw a dip due to profit-taking activities.

Adding to the somber atmosphere was the news that the White House would tighten rules on Chinese access to chips and chip-making equipment, exacerbating the longstanding security standoff between the United States and China.

Market participants will closely monitor speeches this week from several Federal Reserve decision-makers, including Jerome Powell, in the hope of gaining insights into their plans regarding interest rates. This comes after a series of recent indications from officials that they are inclined to maintain borrowing costs, addressing concerns about potential tightening measures that could potentially tip the U.S. economy into recession.