Asian equities fell on Tuesday as doubts over a durable Middle East ceasefire triggered profit-taking in technology shares, offsetting optimism from a wave of artificial intelligence funding announcements.
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Nikkei 225 slides 1.9% as Middle East ceasefire doubts weigh on Asia
The Nikkei 225 slid 1.9% and South Korea's KOSPI dropped as much as 3.3% after renewed fighting undermined hopes for a US-Iran ceasefire. MSCI's Asia-Pacific index excluding Japan slipped 0.6% following a volatile open.
"The move reflects profit-taking after a sharp rally, not a re-rating of the AI trade," an analyst at IG in Sydney said.
The Hang Seng gained 1.2%, bucking the regional trend, while the Shanghai Composite edged less than 0.1% lower and Australia's S&P/ASX 200 fell 0.4%. S&P 500 e-mini futures declined 0.5%, pointing to a softer start on Wall Street.
The selloff shows how fragile risk appetite remains as ceasefire talks between the US and Iran have repeatedly stalled since April, with each false start reinforcing a wait-and-see stance among investors. A sustained conflict risks keeping oil above $90 a barrel, complicating inflation and interest-rate expectations across the region.
Ceasefire doubts drive market caution
Brent crude fell 0.6% to $94.45 a barrel after Lebanon announced a partial ceasefire between Hezbollah and Israel on Monday, retracing some of the previous session's gains. Prices remain well above the roughly $70 level before the conflict began, with the effective closure of the Strait of Hormuz disrupting oil supplies.
Higher crude costs threaten to push inflation higher, reducing the scope for central banks to ease policy. Japan, which imports almost all its oil, has so far contained the impact through reserve releases, but the squeeze is spreading beyond crude into gasoline, diesel and jet fuel, according to Stephen Innes, an analyst at SPI Asset Management.
AI optimism offers a counterweight
Against the broader market decline, AI-related developments provided support to parts of the technology sector. Anthropic confidentially filed for a US initial public offering that could attract a valuation near $1 trillion, while Alphabet said it plans to raise $80 billion through equity offerings, including an investment from Berkshire Hathaway, to fund AI infrastructure expansion.
The capital flows show that investment in AI infrastructure continues even as investors become more selective after a strong run in technology shares. For Asian chip and hardware suppliers, the AI investment cycle remains a major source of support.
South Korea faces tighter policy outlook
South Korean equities were among the hardest hit, with the KOSPI falling as much as 3.3%. The selloff was compounded by domestic inflation data that accelerated in May to its highest level in more than two years, strengthening expectations that the Bank of Korea may raise interest rates next month. The central bank last week indicated a shift toward a more restrictive stance aimed at curbing inflation and supporting the won.
In currency markets, the dollar rose to 159.70 yen from 159.66 yen. The yield on the 10-year Treasury stood at 4.46%, up from 4.45% late Friday, reflecting lingering inflation concerns.
This article is for informational purposes only and does not constitute investment advice.
