Asian Markets Fall in Unison, Weighed Down by War Sentiment and Oil Prices

Asian stock markets opened weaker on Wednesday trading, following heightened geopolitical tensions in the Middle East after United States military strikes against Iran. The sentiment also pressured Wall Street futures and drove up global oil prices. In the Asian region, South Korea’s Kospi index led the declines with a drop of more than 2%. Meanwhile, Japan’s Nikkei 225 index fell 0.71% and Australia’s benchmark S&P/ASX 200 index edged slightly lower. US stock futures were also in the red on Tuesday evening local time. S&P 500 and Nasdaq 100 futures each fell 0.3%, while Dow Jones Industrial Average futures weakened by 161 points, or around 0.3%. The pressure emerged after the US military launched what it called ‘self-defence strikes’ against Iran. The move was a response to the downing of a US Army Apache helicopter the previous day. US Central Command stated the strikes were retaliation for the helicopter shooting incident. US President Donald Trump had previously accused Iran of being responsible for the downing of the helicopter, which was patrolling the Strait of Hormuz. However, Iran has not yet directly acknowledged its involvement in the incident. This latest development is seen as potentially disrupting the still-fragile ceasefire between the two countries while hindering efforts towards a peace agreement. The rising geopolitical tensions also pushed global oil prices higher. West Texas Intermediate crude oil futures were last recorded up about 1% at around US$89 per barrel. In regular trading on Tuesday, semiconductor sector stocks experienced another sell-off, dragging down the main Wall Street indices. The S&P 500 index fell 0.26% and the Nasdaq Composite plunged 0.97%, while the Dow Jones actually gained 86.10 points, or 0.17%. The decline extends a correction that has been ongoing since last week following a long rally driven by optimism over artificial intelligence developments. Chip and memory stocks, which had previously been the main market drivers, are now facing profit-taking from investors. Empower Investments Chief Investment Strategist Marta Norton assessed that the semiconductor sector’s rally in recent weeks had occurred too rapidly. According to her, this condition made market sentiment appear overstretched, thus triggering a correction, although it may not necessarily reflect deteriorating economic fundamentals. Market participants are now also awaiting the release of United States inflation data for May, which will be announced Wednesday morning local time. The Dow Jones consensus estimates the annual inflation rate based on the Consumer Price Index to reach 4.2% with a monthly increase of 0.5%, which would be the highest level since April 2023 and the first time it has breached 4% again since May of the same year.