Asian markets fell into the red on Wednesday, after a meltdown on Wall Street, as investors worried about rising inflation, the end of the Federal Reserve’s financial support, and a Wall Street showdown that might result in a catastrophic US debt default.

Concerns about the potential collapse of Chinese property giant Evergrande, a Chinese energy shortage, and the ever-present fear of the Delta Covid variation were also weighing on trade floors.

After a year and a half of ultra-easy monetary policy from the Fed and other central banks, which has fueled a global economic recovery and sent equities to multi-year highs, authorities have signaled that they are ready to remove the punch bowl.

While the decision was widely anticipated, it comes as inflation continues to rise due to supply chain issues as well as an increase in energy costs – Brent crude broke $80 for the first time in three years on Tuesday.

The Fed signaled last week that it will begin winding down its enormous bond-buying program by the end of the year, while a future interest rate indicator suggested a raise could occur before 2023.

The news was originally taken in stride, but a rise in Treasury yields this week has fueled fears that the Fed would tighten much sooner and more aggressively than previously anticipated as inflation accelerates. The dollar has mostly maintained its recent gains as higher yields make the currency more appealing to investors.

This has fueled speculation about a devastating spell of “stagflation,” in which inflation soars while economic growth remains low.

The Nasdaq led a dramatic sell-off in New York, as IT companies are particularly vulnerable to increasing interest rates as they borrow money to fuel growth.

“What we have here is a stock market that finally appears vulnerable as Treasury yields rise, oil prices look like they may easily reach $90 a barrel, and supply chain difficulties show no signs of abating,” said OANDA’s Edward Moya.

“The Fed was willing to tolerate some inflation overshoot, but the current energy crisis may compel a substantial shift by the end of the year.”

In early Asian trade, Tokyo fell more than 2% after a solid run in recent weeks on anticipation for greater stimulus from a new prime minister, while Seoul fell 2%. Shanghai, Sydney, Taipei, and Manila all fell more than 1%.

Hong Kong, Singapore, and Wellington did marginally better, with Jakarta taking the lead.

Investors are also keeping a wary eye on Washington, where politicians are squabbling over raising the US debt ceiling.

Republicans have refused to consent to the move, despite warnings from top officials such as Treasury Secretary Janet Yellen and Fed Chairman Jerome Powell of an economic calamity if the US fails to make its bond repayment obligations.

Yellen stated that a deal must be reached before the funds runs out around October 18.