ANALYSIS
The war in the Middle East and the tech crash: The perfect storm that's sending Asian stock markets plummeting and putting the world on alert
The continent's major indices are suffering sharp declines ranging from 11% in Seoul to 3% in Tokyo amid concerns over an AI bubble and rising oil prices following the latest clashes between the U.S. and Iran.
A woman looks at a screen displaying stock market prices
AI sneezes, and Asian stock markets catch a cold. Asian markets were hit by a perfect storm stemming from renewed winds of war in the Middle East and the tsunami sweeping through tech companies, especially chipmakers, amid concerns over a potential correction in the artificial intelligence bubble.
The hardest hit is the South Korean stock market, which suffered another sharp plunge on Wednesday, weighed down by the tech sector. This blow was compounded by a surge of up to 5% in oil prices following news of Iran's surprise attack on U.S. bases and the response from U.S. Central Command.
Seoul leads the declines
The Kospi index on the Seoul Stock Exchange closed down nearly 6%, one day after posting a decline of more than 10%. Not even the excellent results reported by chip giant SK hynix, including record profits, could mitigate this decline.
South Korean chip giants have been hit by concerns over the profitability outlook for U.S. artificial intelligence giants, which are announcing massive investments.
Likewise, news of a major Chinese technological breakthrough in semiconductor manufacturing could intensify competition in the chip market, according to AFP.
Bittersweet record for chip giant SK hynix: Higher profits but stock plummets
This combination caused SK hynix shares to lose as much as 18% during the trading session, closing down 11%. On Tuesday, the company's stock had already fallen 14%. Samsung, the other South Korean chip giant, lost more than 12%.
The Tokyo Stock Exchange lost nearly 3%, with sharp declines for semiconductor firms Kioxia (-13.9%) and Tokyo Electron (-11%). The Taipei Stock Exchange lost nearly 3%. Markets such as Hong Kong, Shanghai, Sydney, Singapore, Wellington, Manila and Mumbai provided a bright spot, closing higher.
Strong upward rebound in oil prices
Meanwhile, oil prices rebounded on Wednesday after the U.S. military announced that it had intercepted missiles launched by Iran and carried out retaliatory strikes, following several days of calm in the Middle East.
In light of this new escalation of the conflict, the price of a barrel of WTI crude oil, the benchmark for the U.S. market, rose more than 4% to $82.73. North Sea Brent, the global market benchmark, gained 5% to $88.04.
Global stock markets are holding steady but are eyeing AI and oil with suspicion
For example, European stock markets closed with slight gains, despite the setback in tech stocks, while Wall Street closed with mixed results across its major indices.
Paris rose 0.63%, London 0.83% and Frankfurt 0.41%. Madrid closed with a marginal decline of 0.07%, and Milan closed with losses of 0.69%. Hours later, the Dow Jones Industrial Average gained 1.03%, while the tech-heavy Nasdaq lost 0.22% and the S&P 500 advanced 0.22%.
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