Asian Markets and Oil Prices React to Rising Middle East Tensions

Asian stock markets showed a mixed performance on Monday amid rising geopolitical tensions, while the South Korean Kospi index plummeted nearly 5% as investors pulled back from stocks linked to artificial intelligence (AI). Japan’s financial markets remained closed for a holiday, and U.S. stock futures presented a varied outlook.

Oil prices surged, with Brent crude surpassing the $90 per barrel mark following escalated military actions between the United States and Iran. On Monday, the U.S. initiated attacks for the ninth consecutive night, and Iran responded by targeting U.S.-aligned nations in the Middle East. Brent crude, a global benchmark, increased by 2.6% to $90.40 per barrel, while U.S. benchmark crude rose by 2.2% to $83.58 per barrel.

The U.S. and Iran continue to exchange strikes, which are proving to be deadly for both sides, stated Warren Patterson and Ewa Manthey, ING commodities strategists, in a Monday commentary. They warned that unchecked escalation could trigger widespread attacks across the Persian Gulf.

Traffic through the Strait of Hormuz, a vital channel for world oil transport, slowed significantly, further straining global supply lines. Within the Asian stock market, South Korea’s Kospi, buoyed considerably by the global AI trend, fell 4.9% to 6,490.97. Significant companies like Samsung Electronics saw a 4.4% reduction, while SK Hynix decreased by 3.3%.

The Taiwan Taiex index, another AI stock-heavy market, dipped slightly below 0.1%, though Taiwan Semiconductor Manufacturing Co. (TSMC) gained 2% after announcing a $100 billion expansion in U.S. chipmaking capacity. TSMC had previously dropped 7.3% on Friday.

Elsewhere, Hong Kong’s Hang Seng index increased 2.1% to 25,105.78, and the Shanghai Composite index went up by 1.2% to 3,808.39. Meanwhile, Australia’s S&P/ASX 200 climbed 0.2% to 8,815.30, and India’s Sensex decreased by 0.9%.

Global concerns over a potential AI bubble affected markets as stocks tied to the AI sector, including chipmakers, declined on Friday. Investors are wary of substantial spending commitments in AI, resulting in profit-taking from previous highs. Additionally, the introduction of a new AI model, the Kimi K3 by Beijing-based Moonshot AI, added to market jitters. This development echoed the impact of China’s earlier ‘DeepSeek moment’ in 2025, showcasing the competition from lower-cost Chinese AI models against firms like OpenAI and Anthropic.

In the U.S., the S&P 500 ended the week 1% lower at 7,457.69. The Dow Jones Industrial Average declined 0.8% to 52,146.42, and the Nasdaq composite fell by 1.4% to 25,520.24. Leading chip companies faced declines, with Nvidia falling 2.2%, while Broadcom and Advanced Micro Devices also decreased by 1%.

Elon Musk’s SpaceX saw its shares fall 5.4%, dipping below its IPO price of $135, marking a downturn since its Nasdaq stock debut last month.

Currency transactions included the U.S. dollar dropping to 162.37 Japanese yen from 162.43 yen. The euro appreciated slightly, moving from $1.1438 to $1.1446.