Share markets nosedived in Asia on Monday as the inflationary jolt from surging oil prices threatened to raise living costs and interest rates across the globe, while investors desperate for liquidity fled to the United States dollar.

Brent crude LCOc1 soared 27% to $117.58 a barrel, the biggest daily gain since at least 1988, which came on top of a 28% rise last week. US crude CLc1 shot up a staggering 28% to $116.51, promising to push petrol prices quickly skyward.

Iran named Mojtaba Khamenei to succeed his father Ali Khamenei as supreme leader, signalling that hardliners remained firmly in charge in Tehran a week into its conflict with the US and Israel. That was unlikely to be welcomed by US President Donald Trump, who had declared the son “unacceptable.”

With no sign of an end to hostilities in the Middle East and tankers still not daring to cross the Strait of Hormuz, investors were bracing for a long stretch of higher energy costs.

“Faced with the worst oil supply shock since the 1970s, all eyes will be on Washington’s response,” said Helima Croft, head of global commodity strategy at RBC Capital Markets. “With no clear definition of what winning looks like, it is hard to forecast whether this will be a multi-week or multi-month conflict.”

Read: Who is Iran’s new supreme leader, Mojtaba Khamenei?

“To date, neither White House policy prescriptions nor upbeat television soundbites have alleviated acute market anxiety about the shipping standstill and cascading shut-ins across the region.”

The news was sobering for Japan, a major importer of oil and gas, knocking the Nikkei .N225 down 7.0% on top of a 5.5% drop last week. South Korea’s high-flying market fell closer to Earth with a drop of 8.2%, having already shed more than 10% last week.

China is another big oil importer, though it also has a huge stockpile of crude; its blue-chip index .CSI300 fell 1.7%. China on Monday said inflation had already picked up in February ahead of the current oil spike, with consumer prices rising 1.3% on the year. This is not necessarily a negative development, given the country has long struggled with disinflation.

Central banks face inflation conundrum

The wave of market selling swept over Wall Street as S&P 500 futures ESc1 shed 2.0%, while Nasdaq futures NQc1 dived 2.3%. Over in Europe, EUROSTOXX 50 futures STXEc1 and DAX futures FDXc1 both slid 3.2%, while FTSE futures FFIc1 dropped 1.4%.

In bond markets, the risk of rising inflation outweighed safe-haven considerations to shove yields higher globally. Yields on 10-year Treasury notes US10YT=RR rose 6 basis points to 4.204%, up from a trough of 3.926% just a week ago.

Read More: Hong Kong, China stocks tumble as Iran war knocks Asian markets

Interest rate futures 0#FF slipped as investors feared the risk of higher inflation would make it harder for the Federal Reserve to ease policy, even though disappointing jobs numbers seemed to argue for stimulus.

Data on US consumer prices due on Wednesday is forecast to show the annual pace holding at 2.4% in February.

The Fed’s preferred measure of core inflation is out on Friday and is forecast to hold at 3.0%, well above the central bank’s 2% target, and analysts see a risk of an even higher number.

The danger of energy-driven inflation has led markets to wager the next move in rates from the European Central Bank could be up, possibly as early as June (0#EURIRPR). For the Bank of England, markets have shifted to pricing just a 40% chance of one more easing, compared with two cuts or more before the Middle East conflict started (0#GBPIRPR).

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Nervous investors sought the liquidity of dollars while shunning currencies from countries that are net energy importers, including Japan and much of Europe. “Asia takes the brunt of the sharp escalation in oil prices and there are few places to run and hide,” said Vishnu Varathan, head of macro research for Asia ex-Japan at Mizuho.

“The dollar has to be the one outperforming, given Japan and Korea’s exposures here and the sharp pain that can be expected from Brent at $107.”

The dollar added 0.6% to 158.72 yen JPY=EBS, while the euro slipped 0.8% to $1.1525 EUR=EBS. The Australian dollar, often sold as a hedge during periods of market volatility, skidded 0.9% to $0.6964 AUD=D3.

Gold fell 1.8% to $5,075 an ounce XAU=, with dealers speculating that investors were having to book profits made on the metal’s long climb to cover losses elsewhere.