Asian markets struggle for direction amid West Asia risks, rate-hike bets

Investors weighed the impact of a pause in hostilities between the United States and Iran, while firm oil prices and expectations of higher interest rates kept the dollar near a one-year high

Asian markets were mixed on Monday as selling of artificial intelligence-related shares pulled benchmarks in Japan and South Korea lower, though gains for other stocks helped offset those losses.

US futures advanced and oil prices gained, though they remained close to the levels they were at before the Iran war began in late February.

Tensions between the US and Iran escalated over the weekend as Iran launched fresh drone and missile attacks on Bahrain and Kuwait in response to new US airstrikes, adding to uncertainties clouding the global economic outlook.

Tokyo's Nikkei 225 shed 1 per cent to 68,704.70, after falling 4.2 per cent on Friday. SoftBank Group, the multinational investment holding company which invests in OpenAI, sank 5.9 per cent following a 12.5 per cent drop on Friday.

 

South Korea's Kospi lost 2 per cent to 8,246.50. It was down 5.8 per cent on Friday. Samsung Electronics sank 6 per cent, while memory chipmaker SK Hynix fell 4.5 per cent.

Taiwan's Taiex, also a beneficiary of the global AI boom thanks to its many tech companies including chipmaker TSMC, gained 1.1 per cent as it recovered some losses from its 3.6 per cent decline on Friday.

Japan's and South Korea's markets have soared as many of their Big Tech firms were lifted by demand for computer chips and other high-valued components used in artificial intelligence. Recent worries over AI valuations have trimmed some of those gains.

Hong Kong's Hang Seng gained 2.1 per cent to 23,153.89, while the Shanghai Composite index edged 0.2 per cent higher to 4,034.08. Australia's S&P/ASX 200 rose 0.4 per cent to 8,798.00.

India's Sensex was nearly unchanged.

On Friday, the worries over AI rolled through Wall Street, though shares ended mixed. The S&P500 lost less than 0.1 per cent to 7,354.02 and the technology-heavy Nasdaq composite dropped 0.2 per cent to 25.297.62. The Dow Jones Industrial Average fell 0.1 per cent to 51,876.11.

Micron Technology's shares dropped 6.7 per cent, Intel was down 3.4 per cent, Nvidia fell 1.6 per cent and AMD, or Advanced Micro Devices, fell 2.1 per cent.

In other dealings early Monday, Brent crude, the international standard, was up 0.7 per cent to $73.27 a barrel. It sold for about $72 a barrel before the war began. Benchmark US crude gained 0.8 per cent to $70.02 a barrel.

There's still plenty of risk facing the oil market over on US-Iran re-escalation, ING commodities strategists Warren Patterson and Ewa Manthey said in a commentary Monday, as more questions were raised about the safety of ships in the Strait of Hormuz following attacks on vessels.

Oil traders have been "too optimistic" about the timeline for a recovery in Persian Gulf supplies, they said.

"This complacency is odd and clearly leaves significant upside risk if the supply recovery proves slow - or if we see significant re-escalation," the commentary said.

In currency trading, the US dollar rose to 161.81 Japanese yen from 161.71 yen. The euro was unchanged at $1.1386.