Asian Markets Fall as Middle East Tensions and AI Worries Combine

Asian markets fell on Monday as investors grew cautious due to renewed concerns over disruptions to Middle Eastern energy supplies and weakness in artificial intelligence-related shares.

The Nikkei, Japan's benchmark index, declined by 0.8%, while South Korea's benchmark index dropped 2.1% following calls from the heads of OpenAI and Anthropic for a slower pace of AI development to address associated risks.

MSCI's broadest index of Asia-Pacific shares outside Japan slipped 0.8%, while China's blue-chip CSI300 index eased by 0.4% according to Reuters.

The price of oil surged as fresh attacks involving Saudi Arabia and shipping in the Gulf intensified concerns over global energy supplies. Brent crude rose 2.6% to $107.36 a barrel after gaining nearly 9% last week, while U.S. crude advanced 2.4% to $102.48 a barrel.

The threat of further disruption from Yemen's Houthis and the planned meeting in Oman between Iran and Gulf Arab states to discuss a potential arrangement for reopening the Strait of Hormuz being postponed added to investors' concerns that elevated oil prices could persist, adding to inflationary pressures worldwide.