Hormuz clash spikes oil 4% as South Korean tech stocks plunge
Renewed US-Iran military strikes over the Strait of Hormuz drove crude prices higher, while a severe repricing of AI valuations dragged South Korea's KOSPI down 9 per cent.
Oil prices surged more than 4 per cent on Monday after the United States launched a new wave of military strikes against Iran, shattering a fragile truce and threatening commercial shipping in the Strait of Hormuz. Simultaneously, Asian equity markets were hit by a severe tech selloff, with South Korea's KOSPI index plunging as much as 9 per cent.
The escalation began after Iran attacked a commercial vessel in the strait early on Sunday, forcing its crew to abandon the burning ship. Iran's Revolutionary Guards subsequently declared via state media that the crucial waterway "will be closed until further notice and until the end of American interventions in this region." The US military's Central Command pushed back, stating that the strait remained "open to all vessels seeking to lawfully transit."
Both main crude contracts spiked as much as 4.5 per cent, reviving fears that war-fuelled inflation could force central banks to maintain or hike interest rates. Fawad Razaqzada, a market analyst at Forex.com, noted the immediate market reaction. "One can easily imagine the situation spiralling quite rapidly," he said. "But for now, traders are forced to assume the worst."
Despite the sharp overnight jump, analysts doubt crude will revisit the peaks seen when the conflict erupted on February 28. IG analyst Fabien Yip pointed out that June's return to pre-war levels had priced in a best-case scenario for the fragile arrangement. "Re-escalation exposes how fragile that assumption was," she wrote. However, she added that a repeat of the earlier spike appears unlikely because "demand remains slow to recover while stranded-tanker releases and OPEC+ output quota expansion continue to add barrels to an already oversupplied outlook."
While geopolitical risks lifted oil, stretched valuations in the artificial intelligence sector punished technology equities. The KOSPI's steep drop was led by chip heavyweight SK hynix, which tumbled more than 15 per cent. The firm has now lost nearly 40 per cent since its record high last month, even after its US-listed shares surged almost 13 per cent on their New York debut following a record $26.5 billion share sale. Rival Samsung fell more than 10 per cent.
The selling pressure spread to Japanese tech firms like Advantest and Tokyo Electron, while broader regional markets showed a mixed performance. The US dollar strengthened on safe-haven demand and expectations that the Federal Reserve will need to hike rates at least once this year to tame inflation. Investors are now looking to the upcoming earnings season for clarity on the AI sector's fundamentals, with reports due this week from TSMC, ASML, JP Morgan, Bank of America and Goldman Sachs.
