Oil shock hits Asian tech stocks while European selloff pauses

Selling in hard-hit European shares paused as the focus shifted to Asia - including a record-breaking crash in Seoul, where investors dumped chipmakers on fears of the widening war

SEOUL: Selling in hard-hit European shares paused on Wednesday as the focus shifted to Asia - including a record-breaking crash in Seoul, where investors dumped chipmakers ‌on fears the widening Middle East war will create an oil price shock, raising inflation and delaying interest rate cuts.

Stocks in Dubai and Abu Dhabi down on Wednesday as markets reopened ‌after a two-day halt following Iran's conflict.

Saudi Arabia's benchmark index finished 1.2% higher, on course to extend the previous session's gains, led by an increase of 1.3% in Al Rajhi Bank .

Jabal Omar Development - which runs the Jabal Omar complex ‌of hotels and ‌property within walking distance of the Grand Mosque in the Muslim ⁠holy city of Mecca - advanced about 6%, following a steep rise in annual profit.

Elsewhere, budget airline flynas ‌jumped 4.3%, ending a three-session losing streak.

However, oil major Saudi Aramco slipped 2.3%. Oil prices rose about 1% as U.S.-Israeli strikes on Iran disrupted Middle East supplies, but the pace of gains slowed from past sessions after President ⁠Donald Trump suggested the US Navy could escort vessels through the Strait of Hormuz.

In Qatar, the index added 0.8%, ​with Qatar Islamic Bank advancing 2.2%.

However, Industries Qatar eased 0.3%, as the petrochemical maker announced plans to suspend and cut some products. Muscat's index rose 0.4%, whereas the Bahraini index was down 1.3%.

The Kuwaiti index fell 0.6%. Outside the Gulf, Egypt's blue-chip ⁠index retreated 0.6% Helping bring some calm by midmorning in European ​trading, traders said, was a New ⁠York Times report that operatives from Iran’s Ministry of Intelligence had reached out indirectly to the C.I.A the day after US and ‌Israeli attacks on Iran began, with an offer to ‌discuss terms for ending the conflict.

That helped Europe's broad STOXX 600 to trade 1.5% higher, albeit after falling 4.6% on Monday and Tuesday in its biggest two-day fall since April 2025's tariff turmoil.

European gas prices dropped a touch although they are still 60% up from Friday's level, and S&P 500 futures also swung into positive territory.

But it was far too soon suggest whether ‌this was any more than a short-term blip in this week's big global selloff that has at times threatened to become chaotic as investors try to assess the consequences of energy ⁠prices potentially remaining elevated for an extended period of time.

Plunges in one part of the market have also spilled over into others as investors try to cover for losses elsewhere and cut down on risks.

Even safe-haven gold for example fell more than 4% on Tuesday, though it was back up 2% on Wednesday at $5,193 an ounce.

At the heart of it all, benchmark Brent crude was at $83.07 a barrel on Wednesday, up for a third straight day, but off its Tuesday high. US President Donald Trump said on Tuesday the US Navy could escort tankers through the key Strait of Hormuz if necessary, and oil pared its gains somewhat after the NYT report.

Ship owners and analysts were uncertain how practical that would be.

SEOUL SELLS ​OFF: The strain on Wednesday was felt most strongly in South Korea, where the KOSPI benchmark closed down 12%, its largest drop on record. South Korea ‌is heavily reliant on Middle Eastern oil.

Over two days the tech-heavy index has lost more than 18% of its value while the currency has slumped to a 17-year low.

Japan's Nikkei fell 3.6% and Taiwan stocks dropped 4.3% as investors raced out of what has been one of the hottest bets of the last few months in semiconductor makers.

"Many of the places people had ⁠been diversifying into prior to the Iran attacks suddenly now appear most vulnerable," Matt King, founder of financial market research firm Satori Insights, wrote in a note.

"The 'sell-what-you-can' phase is spreading," said Charu Chanana, chief investment strategist at Saxo in Singapore.

"Asia's selloff is turning disorderly because markets are no longer treating this as a 'one-week headline shock." Wall Street meanwhile has dodged the worst of the selling, and the S&P ​500 is down just ‌under 1% so far this week. Goldman Sachs CEO David Solomon said in a speech in Sydney that he'd been surprised at markets' "benign" reaction up to now to the building ‌risks.

"I think it's gonna take a couple of weeks for markets to really digest the implications of what has happened both in the short term and medium term, and I can't speculate as to how that would play out," he said.

Bond markets, after an initial rally, are now under pressure as investors bet higher oil prices will stoke inflation and delay rate cuts. ‌Traders now see the ‌Federal Reserve as more likely than not to hold rates in June.

"For the United States, ⁠this is very clearly inflationary...so the market's reassessing whether the Fed can actually deliver any rate cuts at all this year," said Andrew Lilley, chief rates ‌strategist for Australian investment bank Barrenjoey.

The benchmark 10-year Treasury yield was up 2bps on the day at 4.08%, having gained 11 bps this week, while rate-sensitive two-year yields are 13 bps higher on the week and last at 3.51%.

Elsewhere, a rate cut by the Bank of England later this month that ⁠had been seen as all but certain now looks off the table, sending the two-year gilt yield up 25 basis points this week, though along with European peers ​it saw a small rebound on Wednesday. That has left cash as the beneficiary, with flows rushing into money-market funds from riskier bets.

The euro tried to bounce back up, 0.3% at $1.1650, but still down 1.15% this week, hammered by higher energy costs.

The dollar has gained more broadly even on currencies seen as safe havens, ⁠and is up 1.3% on the Japanese yen this week and 0.5% on the Swiss franc.

Reuters