Asian markets plunge after record AI rally and renewed Iran attacks

South Korea‘s stock market was forced to halt trading for 20 minutes after the Kospi index plunged by nearly 9% within minutes of Monday’s opening.

The halt is part of a circuit breaker mechanism designed to prevent panic trading and was triggered for the third time this year after a sharp sell-off in technology stocks.

Japans Nikkei 225 index slid by around 4% - the most in three months - as shares of major tech companies fell.

Oil prices also rose on Monday, fuelling concerns of inflation, after Iran and Israel exchanged strikes for the first time since a ceasefire was agreed between the sides and the US in April.

Traders are nervously watching a messy mix of several shocks to the market mainly tied to the tech sector and accelerated by rising energy prices, said chief investment strategist Charu Chanana from Saxo.

Tech stocks have seen a strong run in recent weeks, but investors are repositioning over fears the investments into artificial intelligence may be overvalued, she said.

Markets like the Kospi and Nikkei are particularly exposed to such shocks given their exchanges are dominated by tech stocks.

Trading in South Korea has resumed since the circuit breaker was triggered, with the Kospi index down by about 5%.

The share prices of major South Korean tech companies were sharply lower, including those of chipmakers Samsung and SK Hynix.

South Korean President Lee Jae-myung said on Monday that the stock market is expected to experience volatility but he believes domestic shares are still slightly undervalued.

Overall, the tech-heavy Kospi has seen huge gains in recent months due to a wave of investment in the countrys tech companies.

Investors are more looking for clear signs that AI demand has translated into real revenue, Chanana said. The burden of proof has gone up.

Other Asian stock exchanges, like the Hang Seng Index and the Shanghai Composite were also down on Monday.

The losses follow a wave of sharp drops seen on Wall Street on Friday, where a sell-off in tech stocks saw shares on the Nasdaq lose around 4% - its biggest drop in over a year.

Part of the decline followsfears of a hike in interest rates, due to a lower-than-expected unemployment rate in April as well as persistently high inflation linked to the war in the Middle East.

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The price of the global benchmark Brent jumped by 3.7% to $96.50 (£72.35) a barrel in Asia on Monday, while US-traded crude rose by 3.5% to $93.70 after strikes were exchanged between Iran and Israel.

Tehran has warned that the attacks are the start of a full week of strikes and are a response to a repeated violation of a ceasefire agreed on 17 April between the US, Israel and Iran.

Israel later hit back with attacks on military targets in Iran, despite US President Donald Trump urging the country not to retaliate.

We are very close to a final deal with Iran. It is going to be a good deal. I dont want it to blow up because of what is happening now, Trump told news outlet Axios.

It is too early to say whether the strikes mark a full escalation of the war, but traders are again pricing in risks to global oil markets, said Associate Professor Jiajia Yang from James Cook University in Australia.

The strikes show that many political issues remain unresolved and oil prices are expected to be volatile unless diplomatic efforts succeed, Yang said.

Oil prices have surged since US and Israel launched strikeson Iran on 28 February and have continued to make huge swings throughout the subsequent ceasefire.

Prices have hovered around the $95 mark in the past week as traders weigh the conflicts long-term impact on global energy flows.

The war has disrupted the flow of oil and gas shipments from the Gulf after Iran threatened to strike vessels that try to cross the critical Strait of Hormuz trade route in retaliation for the US-Israeli attacks.