Asian stock markets suffered steep losses on Monday, with major indexes plunging over 3% as fears mounted over a potential escalation in the ongoing US-Iran war.

Japan's Nikkei 225 index closed down 1,857.04 points, or 3.48%, at 51,515.49, marking one of its worst sessions in recent months. Hong Kong's Hang Seng Index fell 894.85 points, a 3.54% decline, to end at 24,382.47. Mainland China's Shanghai Composite Index dropped 143.77 points, or 3.63%, to 3,813.28. South Korea's KOSPI and Australia's ASX 200 also slid, reflecting broad regional unease.

The selloff came amid heightened tensions between the United States and Iran, now in the fourth week of open conflict. President Donald Trump issued a stark 48-hour ultimatum to Tehran on Sunday, demanding the reopening of the Strait of Hormuz or facing devastating strikes on Iranian power plants and infrastructure. Iran responded defiantly, with officials vowing punitive measures including missile strikes and warnings that the US would 'burn.'

The Strait of Hormuz, through which about 20% of global oil flows, remains a flashpoint, with disruptions already pushing crude prices higher and stoking inflation worries worldwide. Trump's warning included nuclear undertones, further rattling investors. Iranian missile barrages continued under 'Operation True Promise 4,' targeting perceived aggressors.

Energy stocks bore the brunt in Asia, while airlines and export-heavy sectors tumbled on supply chain fears. The broader rout extended a global selloff, with Wall Street futures pointing lower ahead of the US open. Analysts pointed to the war's threat to global energy supplies as the primary driver, overriding other economic data.

The conflict traces back to earlier US strikes on Iranian targets, prompting retaliation and a cycle of escalation. Tehran accuses Washington and Israel of violations, while the US frames its actions as defensive. As the ultimatum clock ticks, set to expire late Monday, markets braced for possible US military action.

Regional currencies weakened against the dollar, amplifying import costs in import-dependent economies like Japan and South Korea. Safe-haven assets such as gold and the yen saw inflows amid the volatility.

Investors now watch for any de-escalation signals or further provocations, with oil above $100 per barrel adding pressure on central banks to address inflation risks tied to the war.