Share markets drop in Asia amid Gulf developments

MSCI’s broadest index of Asia-Pacific shares outside Japan shed 0.9%

Share markets slid in Asia on Monday as fighting intensified ​in the Gulf and Iran closed the vital Strait of Hormuz, sending oil prices surging and rekindling inflation risks internationally.

Tech continues to screen highly in our models, supported by stand out earnings growth/momentum and attractive valuations, wrote analysts at Citi in a note.

While AI ​volatility may remain elevated over the coming quarter, we maintain our Overweight stance on global IT and the U.S., they added. We pair these growth exposures with over weights in cyclical regions/sectors, including Japan, financials and materials.

Brent crude jumped 4.1% to reach $79.11 a barrel, up from the recent low of $70.14.

Nikkei dropped 1.6%, having declined ​1.7% last week, while MSCI’s broadest index of Asia-Pacific shares outside Japan shed 0.9%.

South Korea’s formerly strong market declined 5.4%, and will be in focus ​having shed nearly 8% last week as leveraged bets on semiconductor shares came under pressure. The market has emerged as a key international barometer for chip-sector sentiment and further losses could ‌ripple out ⁠more broadly.

Analysts at BofA warned the AI capex boom was eroding cash generation with hyperscalers having spent $234 billion this year and forward free cash flow expected to turn negative for the first time since at least 2007.

Against that backdrop, many overlooked areas offer materially better value, they cautioned in a note.

The spike in ​oil pushed 2-year U.S. Treasury yields to their ​highest since early 2025 at 4.2393%, ⁠while Fed fund futures slid 2 points, implying 39 basis points of policy tightening by the end of the year.