China, Hong Kong stocks tumble as escalating Iran war rattles markets

China and Hong Kong stocks fell sharply in early trading on Monday, as the escalating Middle East war roiled global financial markets.

Both China's blue-chip CSI300 Index and the Shanghai Composite Index lost roughly 2% at the open. Hong Kong's Hang Seng Index tumbled nearly 3%.

Iran said on Sunday it would strike the energy and water systems of its Gulf neighbours in retaliation if US President Donald Trump follows through with a threat delivered a day earlier to hit Iran's electricity grid in 48 hours, a major escalation in the three-week-old war.

"The future path of oil prices and their effects on global growth and financial conditions depend on how long the Strait of Hormuz remains closed, which is highly uncertain," Goldman Sachs said in a note.

"For China, the impact hinges on both the demand and supply situation outside of China."