Asian stocks drop amid geopolitical tension

In addition to geopolitical jitters, Asian markets were also pressured by losses in technology shares, as investors remained uncertain over the impact of AI on the sector

Asian stocks dropped sharply on Monday after the U.S. and Israel attacked Iran over the weekend, pushing up oil prices and spurring a broader rush out of risk and into safe havens.

Hang Seng index and Nikkei 225 were among the worst performers in Asia, slipping 2.4% and 1.6%, respectively. The two were also pressured by losses in tech stocks.

TOPIX index dropped 1.6%, while Shanghai Shenzhen CSI 300 and Shanghai Composite indexes declined 0.6% and 0.5%, respectively.

ASX 200 shed 0.5%, Straits Times index slipped 1.8%, while futures for India’s Nifty 50 index declined 0.8%.

Markets fell across the board after the U.S. and Israel attacked Iran over the weekend.

The weekend strikes saw oil prices rise sharply on Monday as markets feared supply disruptions in the Middle East. Higher crude prices also signal inflationary headwinds for several Asian countries, which heavily rely on imports of the commodity.

In addition to geopolitical jitters, Asian markets were also pressured by losses in technology shares, as investors remained uncertain over the impact of AI on the sector.

Software stocks in particular were nursing deep losses in February on concern over heightened competition from AI tools.

In China, focus is on the upcoming “two sessions” meetings of the country’s top political bodies, which are scheduled between March 4 and March 11. The meetings will establish the agenda for China’s 15th Five-Year Plan.

Beijing is widely expected to outline more stimulus measures, especially as Chinese economic growth slowed steadily in the 2020s.

Interest rate uncertainty also weighed, as markets priced out expectations of more interest rate hikes by the Bank of Japan in the near-term, especially after weak inflation data from the country.

But markets grew increasingly convinced that the Reserve Bank of Australia will raise interest rates further in the coming months, as the country grapples with a late-2025 resurgence in inflation.