Asian equities mixed as Kospi plunges 5.5% on chip stock rout
Oil prices climbed in Asian trading Wednesday as the United States and Iran traded airstrikes, breaking a fragile interim peace deal and renewing fears of supply disruptions out of the Middle East. The U.S. struck sites along Iran’s coast and revoked Tehran’s license to sell oil on international markets Tuesday in retaliation for Iranian attacks on commercial vessels near the Strait of Hormuz, a critical waterway that carries one-fifth of global seaborne oil, according to a senior U.S. official.
Iran responded by firing drones and ballistic missiles at Bahrain and Kuwait, both of which host American military bases and have supported the U.S. campaign throughout the conflict.
The attacks represent the most significant escalation since the two countries signed a memorandum of understanding on June 17 that was intended to reopen the Strait of Hormuz and wind down hostilities. The Treasury Department said the temporary license granted to Iran to sell oil on the open market was no longer valid.
“The ship attacks underscore the risks around timely resumption in oil flows,” Commonwealth Bank of Australia sustainable and energy economist John Oh said in a report. Oh also pointed to an attack on a Qatari LNG carrier off the Omani coast, saying it “raises risks on whether safe passage through the strait along the Omani coast can continue to be maintained.”
Front-month West Texas Intermediate crude oil futures rose 3.3% to $72.75 a barrel, and front-month Brent crude futures increased 3.3% to $76.58 a barrel, according to ICE data.
Asia-Pacific equity markets were mixed. Hong Kong’s Hang Seng Index rose 3.1%, while Japan’s Nikkei Stock Average fell 1.6%. South Korea’s Kospi dropped 5.5% after swinging between gains and losses, with defense and chip stocks leading the decline. The Korea Exchange briefly activated trading curbs on both the Kospi and the smaller tech-heavy Kosdaq markets.
“The dominant theme for equities has been the rotation out of chip makers,” National Australia Bank head of markets research Skye Masters said in a commentary. “Having finished the best-ever quarter, chip stocks have seen strong selling pressure, with the Philadelphia Semiconductor Index down overnight, as investors realize some profits and rotate into other sectors.”