Asian markets steadied after an initial sell-off triggered by concerns that renewed hostilities in the Middle East could disrupt energy supplies and weigh on global economic growth. According to CNBC TV18, MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.9%, with South Korea's KOSPI leading regional declines, dropping as much as 4.1% before recovering to rise 0.34%. The selloff intensified after US military launched a fresh round of strikes on multiple targets in Iran, with President Donald Trump warning of further attacks if a peace agreement is not reached. Iran responded by announcing the closure of the Strait of Hormuz, a critical global energy shipping route. The risk-off mood has added pressure on Asian markets that had rallied strongly over the past two months, particularly technology-heavy markets such as South Korea and Taiwan.
Oil prices climbed after the United States launched another round of military strikes against Iran, raising concerns about a prolonged disruption to energy supplies. Brent crude futures gained 1.57% to $94.56 a barrel, while US West Texas Intermediate (WTI) crude rallied 1.89% to $91.73 a barrel. As reported by Livemint, the strikes jeopardised the precarious ceasefire and attempts to reach an agreement to reopen the Strait of Hormuz, with Iran saying the Strait of Hormuz was closed to all types of vessels. With prospects for fully reopening the Strait of Hormuz in doubt, oil prices resumed their upward climb from approximately $70 a barrel before the war in late February. ING commodities strategists noted that demand tends to be strong at this time of year, adding to upward pressure on prices. The Middle East situation remains delicate with the oil market reacting to the latest developments.
Asian markets showed mixed performance as they recovered from steeper earlier losses. Hong Kong's Hang Seng gained 0.20%, while South Korea's Kospi rose 0.34% after tumbling as much as 4.1% earlier in the day. Japan's Nikkei 225 declined 0.44% to 63,896.82, recovering from an earlier decline of nearly 3% that saw the benchmark fall below the 63,000 level for the first time since May 22. The Topix dropped 0.85% to 3,814.97. China's Shanghai Composite fell 0.2% to 3,983.80, while Taiwan's Taiex slipped 0.4%. The region's markets steadied after an initial sell-off triggered by concerns that renewed hostilities in the Middle East could disrupt energy supplies and weigh on global economic growth.
South Korea's equity benchmark has experienced unprecedented volatility as Samsung Electronics Co. and SK Hynix Inc., which together account for more than half of the index, face turbulence affecting artificial intelligence-tied stocks. According to The Hindu BusinessLine, Samsung Electronics, which makes memory and logic chips and is the country's most valuable company, sank 5.8%, while chipmaker SK Hynix plummeted 6.3%. Hyundai Motor and sister automaker Kia Corp were down 2.50% and 0.24% respectively, while battery maker LG Energy Solution slid 0.76%. Of the total 919 traded issues, 443 shares advanced, while 431 declined, showing mixed performance across sectors. Foreigners were net sellers of shares worth 1.9 trillion won ($1.25 billion), indicating international investors are reducing exposure to Korean markets. The won was quoted at 1,519.4 per dollar on the onshore settlement platform, 0.88% higher than its previous close at 1,532.7 as the currency strengthened amid the geopolitical tensions.
The cautious sentiment followed a weak session on Wall Street, where the S&P 500 fell 1.6%, and the Nasdaq Composite dropped 2%, as investors reacted to data showing US inflation accelerated in May at its fastest pace since April 2023. According to CNBC TV18, the stronger inflation print has shifted expectations around Federal Reserve policy, with traders marginally increasing bets that the US central bank's next rate hike could come as early as October, although expectations remain finely balanced. Market participants are increasingly questioning whether the robust earnings growth expectations that fuelled the rally can be sustained amid rising geopolitical and macroeconomic risks. The latest geopolitical flare-up has added pressure on Asian markets that had rallied strongly over the past two months, particularly technology-heavy markets such as South Korea and Taiwan.
