Asian stocks are falling, while oil prices are climbing following reciprocal attacks on key gas facilities in the Middle East.

Japan’s benchmark Nikkei 225 is under pressure as investors digest the latest attacks on energy sites as well as the Bank of Japan’s decision to hold interest rates steady, The Caspian Post reports, citing foreign media.

Other major indexes across the region - Seoul’s Kospi, Hong Kong’s Hang Seng, and the Shanghai Composite - are also in the red as Brent crude, the global oil benchmark, trades higher.

The conflict in the Middle East has intensified into direct state-on-state strikes targeting critical energy infrastructure. On Wednesday, Qatar reported “extensive damage” to its main liquefied natural gas (LNG) facilities after Iranian missile attacks.

Earlier, Iran had vowed retaliation for an Israeli attack on its gas field in South Pars - the world’s largest. The strike marked a significant escalation in the war.

South Pars is the foundation of Iran’s energy supply. According to the US EIA, 85% of the country’s electricity is generated from gas.

Early Thursday, the UAE shut down its own gas facilities after intercepting incoming missiles. Analysts warn that the damage at Ras Laffan could trigger a lasting global gas shortage.

Asia remains particularly vulnerable. The region consumes more than 80% of the oil and gas that passes through the Strait of Hormuz, and most LNG from Qatar and the UAE is destined for Asian markets. There are few alternatives to supply this vast energy need.

Governments across Asia are scrambling to respond. Cambodia is now importing fuel from Malaysia and Singapore as Vietnam and China restrict supplies. Japan has tapped its national oil reserves, while South Korea has capped fuel prices and is shifting toward coal and nuclear power. Energy rationing measures have been implemented across several countries.

On Wednesday, Federal Reserve Chair Jerome Powell said the widening conflict adds new uncertainty to the inflation outlook.

The Fed kept interest rates unchanged, as did the Bank of Japan on Thursday.