Asian equities reversed early gains on Thursday, pressured by a combination of hotter-than-expected US inflation data and a fresh escalation in the Iran conflict that sent oil prices surging. The MSCI index of Asia-Pacific shares outside Japan dropped 1%, while Taiwan's benchmark slid 1.5% and Japan's Nikkei 225 fell by a similar margin.
Oil Spike and Iran Tensions
The latest wave of selling followed the US military's announcement of new strikes on targets in Iran, after President Donald Trump warned of further attacks if no peace deal is reached. In response, Iran declared the closure of the Strait of Hormuz, a critical chokepoint for global oil shipments. Brent crude rose 3% to $95.45 a barrel in Asian trading, adding to concerns that sustained energy price increases could complicate the inflation outlook for major economies.
The rally in crude came after Brent settled 1.8% higher at $93.10 on Wednesday, when Trump's comments had already renewed worries over supply disruption. The inflation backdrop also gave markets little comfort. Data released in the US showed consumer prices accelerated last month at the fastest pace since April 2023, even though the figures were broadly in line with expectations.
KOSPI and Tech Sector Under Pressure
South Korea's KOSPI swung between gains and losses as investors searched for a floor after five declines in six sessions. The index was last down 1.2%, having earlier fallen as much as 4.4%. The selloff has hit some of the region's biggest recent winners, particularly markets linked to technology and artificial intelligence. Strategists noted that Asian equities that had rallied strongly over the past two months looked increasingly vulnerable as investors questioned whether earnings expectations had run too far ahead.
Stretched valuations and aggressive growth assumptions have left Korea, Taiwan and the broader Asian tech sector exposed to a reversal. AI-linked shares found some support, but the wider sector remained under pressure after Oracle dropped 8.9% in extended US trading. The company forecast fiscal 2027 capital spending above Wall Street estimates and said it planned to raise nearly $40 billion through debt and equity financing, intensifying investor focus on the cost of building AI infrastructure.
For context, the recent volatility in Korean tech stocks echoes patterns seen in earlier selloffs. In a related development, Kospi Plunges 6.4% as Samsung, SK Hynix Rout Precedes TSMC Earnings Test highlighted similar pressures on semiconductor names.
Wall Street Selloff and Rate Expectations
The S&P 500 fell 1.6% on Wednesday, while the Nasdaq Composite lost 2%. US equity futures steadied after earlier losses, with S&P 500 e-mini contracts last up 0.2%, but the broader tone remained cautious as investors weighed the risk of a wider Middle East conflict and more persistent inflation.
Rate traders moved slightly closer to pricing another Federal Reserve hike. Fed funds futures implied a 51.6% chance of a rate increase at the Fed's October 28 meeting, compared with expectations a day earlier that leaned narrowly towards no move until December. The US 10-year Treasury yield rose 1 basis point to 4.5483%.
Currency and Commodity Markets
In currencies, the euro edged up 0.1% to $1.1546 ahead of the European Central Bank's policy decision. Markets widely expect the ECB to raise interest rates, keeping attention firmly on central banks as inflation pressures persist. The dollar index held steady at 100.03, staying within its narrow range of the past week. Safe-haven demand has supported the greenback as tensions between the US and Iran have escalated.
Gold slipped 0.4% to $4,055.55 as the dollar held firm. Meanwhile, bitcoin gained 0.4% to $62,013.58 and ether rose 0.3% to $1,634.13, stabilising after a broader selloff in speculative assets. The recent oil spike has also weighed on gold, as discussed in Gold Retreats From 2% Rally as Oil Spike Threatens to Undermine Inflation Relief.
European futures pointed to further weakness at the open. Pan-regional contracts fell 0.8%, German DAX futures lost 0.6% and FTSE futures slipped 0.9%. The broader market remains on edge as investors monitor developments in the Middle East and central bank policy responses.
This article is for informational purposes only and does not constitute financial advice.
