MSCI’s Asia Pacific equities gauge dropped 1.1%, with South Korea leading with a 4.5% decline. Chip bellwether SK Hynix Inc. tumbled over 8.4%. Shares in Japan also declined with the Nikkei dropping over 2%.
Meanwhile, crude oil extended gains as the US launched fresh strikes on Iran, raising concerns that Middle East tensions will further disrupt energy supplies. Brent climbed for a fourth consecutive day to over $85 a barrel.
Australian and New Zealand government bonds opened higher, tracking gains in Treasuries after softer-than-expected US producer price inflation for June. That prompted traders to further dial back wagers on Federal Reserve interest-rate increases this year. A Bloomberg gauge of the dollar steadied after two days of losses.
While inflation reports this week eased concerns over near-term Fed hikes, the escalating conflict in the Persian Gulf has revived concerns over energy supplies from the region. Investors are also assessing whether strong earnings can sustain the artificial intelligence rally after sharp swings in semiconductor stocks exposed lingering concerns over the sector’s lofty valuations.
“There’s no near-term pressure on the Fed, but oil is in the driver’s seat over the longer term,” said David Russell at TradeStation. “Energy saved the day in June, but that might become ancient history if the Strait of Hormuz doesn’t open soon.”A US-Iran interim peace deal signed around a month ago has all but collapsed over the past week as the two sides feud over control of the vital strait, through which Saudi Arabia, Qatar, the United Arab Emirates and others send most of their energy exports. The latest attacks come as US President Donald Trump pledged to intensify the bombardment until Tehran stops attacking ships in the Strait of Hormuz and agrees to open the waterway.
Elsewhere, the chip sector remained in focus after a volatile month. After SK Hynix Inc.’s American depositary receipts fell 9% on Wednesday, investors will look to Taiwan Semiconductor Manufacturing Co.’s earnings later Thursday for a fresh read on the AI buildout.
