Stock markets across Asia were hit again on Wednesday amid panic selling over fears the Israel-US war on Iran will fan inflation and rock the global economy.
The Korean market suffered the worst again, with the Kospi index plunging by more than 12% as investors unwound tech positions built up in recent months in local chip giants because of the AI boom.
The selling came as oil prices rallied further on the fifth day of attacks on the Islamic republic, with observers warning that the blockade of supplies from the Middle East could fan inflation and shatter hopes for more interest rate cuts.
ALSO SEE: War in Iran Could Hit Some of Asia’s Biggest Economies Hard
US President Donald Trump pledged that if needed, the navy would escort oil tankers through the Hormuz Strait – through which about a fifth of global oil supplies flow – and ordered Washington to provide insurance for shipping.
On Wednesday, Iran’s Revolutionary Guards said passage through the Strait was “under the complete control of the Islamic Republic’s Navy”.
Iranian strikes on several neighbours has threatened to broaden the conflict, while uncertainty about how long the war would take added to upward pressure on crude prices, with both main contracts climbing around 3% on Wednesday.
Oil prices rising
Both main contracts, Brent and West Texas Intermediate, have soared around 15% since Friday, before the attacks began. Brent hit a high above $85 on Tuesday and WTI topped out near $88. Some analysts warn they could soon hit $100.
Seoul’s Kospi, which had rattled to multiple record highs since the start of the year on the back of the AI tech boom, was sent reeling.
Trading on the index and Kosdaq was halted after they both sank more than 8%, and when business resumed they extended losses.
The Kospi crashed more than 12% – after shedding more than 7% on Tuesday – as panic-selling set in.
That left the index suffering its worst two-day collapse since 2008, during the global financial crisis. It has also more than halved the near 50% gains enjoyed between the start of the year and Friday. It rose 76% last year.
Chip giants Samsung and SK Hynix, which have led Seoul’s surge this year, dived 11.7% and 9.6% respectively.
Headache for central banks
“Asian equities are now staring at a third consecutive day of losses and the reason is not mysterious,” Stephen Innes at SPI Asset Management wrote.
“When crude edges higher, the invoice lands hardest in Asia, where imported energy is not just a line item but a structural dependency.
“Export-driven economies suddenly find themselves recalculating margins with a more expensive barrel sitting quietly in the background of every factory floor and shipping lane.”
Chung Hae-chang, analyst at Daishin Securities, added: “Because South Korea, Japan, China and Taiwan rely heavily on energy shipments that pass through the Strait, any blockage would have significant negative effects on the market.”
Nikkei down 3%, SET tumbles 8%
Japan’s Nikkei 225 ended off more than 3%, with chipmakers Advantest and Tokyo Electron losing more than 4%.
Elsewhere in Asia, Taipei sank more than 4%, while the Stock Exchange of Thailand in Bangkok tumbled 8% to also spark a trading halt.
Hong Kong, Sydney, Singapore, Shanghai, Wellington, Mumbai, Manila and Jakarta were also deep in negative territory.
The selling followed big losses in Europe, where London fell 2.8% but both Frankfurt and Paris dropped by more than 3% – hit by a spike in natural gas prices to their highest levels since Russia’s invasion of Ukraine.
The prospect of energy costs spiking has hammered hopes for any more central bank interest rate cuts, as officials were already concerned about still-elevated inflation.
Analysts said the Federal Reserve, European Central Bank and Asian central banks are likely to delay interest rate cuts, but the Bank of England, as well those in parts of Latin America and Central Europe could be forced to hike.
The dollar extended its recent gains fuelled by bets on fewer – and possibly no – rate cuts as well as its safe haven status.
Key figures at around 0700 GMT
Seoul – Kospi: DOWN 12.1% at 5,093.54 (close)
Tokyo – Nikkei 225: DOWN 3.6% at 54,245.54 (close)
Hong Kong – Hang Seng Index: DOWN 2.5% at 25,113.88
Shanghai – Composite: DOWN 1.0% at 4,082.47 (close)
West Texas Intermediate: UP 2.6% at $76.46 per barrel
Brent North Sea Crude: UP 2.9% at $83.73 per barrel
Euro/dollar: DOWN at $1.1610 from $1.1617 on Tuesday
Pound/dollar: DOWN at $1.3333 from $1.3358
Dollar/yen: DOWN at 157.43 yen from 157.59 yen
New York – Dow: DOWN 0.8% at 48,501.27 (close)
London – FTSE 100: DOWN 2.8% at 10,484.13 (close)
AFP with additional editing by Jim Pollard
ALSO SEE:
Nepal Facing AI Disinformation ‘Onslaught’ Ahead of Key Polls
Vietnam Fast Out of the Box to Pass First AI Law in Southeast Asia
India Fuels Nuclear Ambitions with $1.9b Canada Uranium Pact
China ‘Weaponising Chokepoints’ With Export Curbs on Key Rare Earths
China’s Xiaomi to Set up Safety Panel After Fatal EV Accidents
Hong Kong Exchange Tops Global Listings, Earns Record Profit
China Finds Way to Fight Desertification, Turn Sand Into Fertile Soil
India Puts Off Talks, China Says ‘Cancel Tariffs’ After US Ruling
China Using Trump ‘Uncertainty’ to Dominate Global Trade
