Asian stocks plunge as oil shock rattles chips and bond markets

Asian stocks fell on Monday as renewed fighting in the Gulf pushed oil sharply higher and pulled investors back from risk.

Iran said it had closed the Strait of Hormuz, while US officials said some vessels were still being escorted through the waterway, leaving traders to price the risk of disruption rather than a confirmed complete shutdown.

The move hit chip-heavy markets hardest, with South Korea’s KOSPI extending last week’s slide as leveraged semiconductor bets came under pressure.

The dollar and bond yields rose, while gold weakened as higher energy costs revived inflation and Fed rate concerns.

Oil shock hits risk appetite

Brent crude jumped 4.1% to $79.11 a barrel, while US crude rose by a similar margin to $74.37.

The surge took Brent well above its recent trough near $70 and reminded investors how quickly the Gulf conflict can feed into global inflation expectations.

US officials said about 20 vessels had been escorted through Hormuz over the previous 24 hours, though ship-tracking data pointed to very limited traffic.

That uncertainty was enough to pressure equities. S&P 500 futures fell 0.4% and Nasdaq futures lost 0.9%, while European futures also moved lower.

June US inflation data due Tuesday and Fed Chair Kevin Warsh’s first congressional testimony in his new role now carry extra weight.

Markets are again debating whether higher oil could force the Fed to stay hawkish.

KOSPI becomes the chip stress test

The sharpest equity damage came in South Korea. The KOSPI fell 5.4%, after losing almost 8% last week, as the market’s red-hot semiconductor trade unwound further.

The index has become a global barometer for AI-chip sentiment because of the outsized role played by Samsung Electronics and SK Hynix.

SK Hynix’s US-listed shares jumped almost 14% in their Nasdaq debut on Friday after the company’s $26.5 billion ADR sale, but that success did not stop selling in Seoul.

Investors are now questioning whether the AI rally has run ahead of earnings and cash generation.

Bank of America analysts have warned that the AI capex boom is eroding free cash flow at hyperscalers, even as chip suppliers benefit from demand.

Citi analysts still favour global technology and US equities, but acknowledge AI volatility may remain elevated.

Dollar and yen stay in focus

The oil spike lifted two-year Treasury yields to their highest level since early 2025 and kept the dollar index firm near 101.13.

The euro slipped, reflecting Europe’s greater dependence on imported energy.

The dollar also rose to about 162.03 yen, reversing part of Friday’s move after Japan’s finance minister floated ways to encourage pension funds, including GPIF, to hold more domestic assets.

NAB economists see any shift in GPIF allocations as potentially yen-supportive, though changes are likely to be gradual.