Tech shares drive Asian gains while Middle East strikes lift oil above US$92

Asian technology shares extended a two-day rally on Wednesday, mirroring overnight gains on the Nasdaq. Tokyo markets climbed nearly 2 per cent. Meanwhile, semiconductor-heavy Seoul surged 5.4 per cent as investor enthusiasm for the sector returned.

The technology sector has experienced significant volatility amid growing concerns that artificial intelligence valuations are overextended and disconnected from underlying reality. Stephen Innes at SPI Asset Management noted that during the initial phase of the boom, companies were rewarded simply for announcing larger investment plans. This dynamic has left investors questioning the sustainability of current market pricing.

"A higher spending guide may still support chip demand, but it also raises questions about free cash flow, funding needs and how much of the future is already embedded in valuations," Innes said. Market participants are now looking to upcoming earnings reports for clarity on these massive capital expenditures. Tesla and Alphabet are scheduled to release results later Wednesday, followed by Microsoft, Meta, Apple and Amazon next week.

Geopolitical instability simultaneously drove energy prices higher, pushing Brent crude up roughly 1 per cent to above US$92 a barrel. This marks the highest intraday level for the benchmark since Jun 11. President Donald Trump stated the United States was "not finished" attacking Iran following an 11th consecutive night of military strikes.

The US military indicated these ongoing operations aim to further degrade Iran's ability to threaten commercial shipping in the Strait of Hormuz. Regional tensions intensified further after Houthi rebels threatened a blockade of Saudi Arabia's ports on Monday. In response, Trump warned he would "take care of" the Iran-backed group if they followed through on those threats.

Jay Hatfield at Infrastructure Capital Management expects the oil price to remain in the US$80 to US$90 range depending on daily news flow. However, he cautioned that an actual closure of the Red Sea remains a distinct threat that has not yet materialised. "That could shoot us over US$100," Hatfield said.

The surging energy costs are compounding currency pressures across the region, particularly in energy-importing nations. The Japanese yen fell below 163 against the dollar late Tuesday. This decline marks the currency's weakest point since 1986.