TOKYO (AP) — Asian shares dipped in Monday morning trading, as oil prices continued to climb after U.S. President Donald Trump’s latest comments dashed hopes for an early end to the war in Iran.

Japan’s benchmark Nikkei 225 dropped 3.5% to 51,523.58 in morning trading. Australia’s S&P/ASX 200 fell 0.7% to 8,369.80. South Korea’s Kospi dove 4.8% to 5,502.75. Hong Kong’s Hang Seng slipped 2.7% to 24,591.77, while the Shanghai Composite declined 1.4% to 3,899.88.

Trump over the weekend warned the U.S. will “obliterate” Iran’s power plants if it doesn’t fully open the Strait of Hormuz within 48 hours, prompting Tehran to say it would respond to any such strike with attacks on U.S. and Israeli energy and infrastructure assets in the region.

“Trump’s ultimatum and Iran’s retaliatory warnings point to a widening conflict that keeps energy disruption and market volatility elevated with no clear off-ramp in sight,” said Ng Jing Wen, analyst at Mizuho Bank in Singapore.

Higher oil prices, which also shook stock markets on Friday, dashed hopes for a possible upcoming cut to interest rates by the Federal Reserve, analysts said. Before the war, traders were betting that the Fed would cut rates at least twice this year. Central banks in Europe, Japan and the United Kingdom also recently held their interest rates steady.

The S&P 500 fell 1.5% Friday to close its fourth straight losing week, its longest such streak in a year. The Dow Jones Industrial Average dropped 443 points, or 1%, and the Nasdaq composite tumbled 2%.

In energy trading, benchmark U.S. crude added 32 cents to $98.55 a barrel. Brent crude, the international standard, lost 12 cents to $112.07 a barrel. The price of Brent crude has zigzagged lately from about $70 per barrel before the war began to as high as $119.50.

On Wall Street, roughly three out of every four stocks in the S&P 500 fell on Friday. Stocks of smaller companies, which can feel the pinch of higher interest rates more than their bigger rivals, led the way lower. The Russell 2000 index of smaller stocks fell a market-leading 2.3%.

In the bond market, the yield on the 10-year Treasury finished last week with a jump to 4.38% Friday from 4.25% late Thursday and from just 3.97% before the war started. The two-year Treasury yield, which more closely tracks expectations for what the Fed might do, rose to 3.88% from 3.79%.

In currency trading, the U.S. dollar rose to 159.44 Japanese yen from 159.22 yen. The euro cost $1.1553, down from $1.1571.

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AP Business Writers Can Ho-him in Hong Kong, and Stan Choe in New York contributed to this report.

Yuri Kageyama, The Associated Press