Asian Stocks Plunge as AI Fears and Oil Prices Soar
Asian stocks fell on Friday as investors grew skeptical about the returns from massive spending on artificial intelligence. The MSCI Asia-Pacific Index dropped by 1%, with Japan and South Korea's gauges both down more than 2%. Chip bellwethers Samsung Electronics, SK Hynix, and Kioxia each lost over 3%.
The tech-led market sell-off was compounded by higher oil prices, which drove Treasuries lower and lifted the US dollar. Brent traded above $100 a barrel, with some analysts predicting that inflation could re-accelerate and delay interest rate relief.
US President Donald Trump's threat to escalate the conflict with Iran after Houthi militants attacked two Saudi Arabian oil tankers in the Red Sea added to the risk of disruptions to global energy supplies. This has complicated the Federal Reserve's policy outlook ahead of next week's meeting, with money markets now fully pricing in a rate increase by September.
As investors grapple with doubts over returns from AI spending and the prospect of more persistent inflation, some experts are cautioning that any short-term correction could attract dip buyers. However, others warn that the risks are great, not only to shipping but also to energy infrastructure, as conflicts escalate in the region.