Global stocks and bonds fell sharply as investors grappled with a convergence of market headwinds, including a pullback in the artificial intelligence-driven rally, rising expectations of further US interest rate hikes, and escalating geopolitical tensions in the Middle East.
MSCI’s Asia equity index dropped 2.8%, with South Korea’s KOSPI falling nearly 5%. The decline was led by a sharp selloff in semiconductor and technology stocks, briefly forcing a trading halt in the benchmark, which had previously been one of the world’s best-performing indices this year due to AI-related gains.
Broader regional markets also weakened, with equities in Japan and Taiwan sliding as tech shares led losses. Futures pointed to further declines in European markets, with expectations of a 1% drop at opening.
The downturn coincided with renewed volatility in energy markets, as Brent crude oil surged 3.5% to above $96 per barrel. The spike followed reports that Israel struck several military targets in Iran in response to missile attacks from Tehran, intensifying concerns over a wider regional conflict.
Higher oil prices are expected to add upward pressure to global inflation, reinforcing market expectations that the US Federal Reserve may maintain or increase interest rates for longer than previously anticipated. Strong US labour market data has further strengthened those expectations.
The simultaneous decline in both equities and bonds marks one of the most significant stress tests in months for global financial markets, which have recently been supported by optimism around artificial intelligence and easing geopolitical tensions.
