Stocks Sink Across Asia as Winning Trades Unravel: Markets Wrap
(Bloomberg) — Asian stocks plunged the most in nearly a year, led by the biggest South Korean crash since the global financial crisis in 2008, as mounting concerns over the Iran war triggered an exodus from some of the world’s best-performing markets.
The MSCI Asia Pacific Index slumped as much as 4.5%, with South Korean stocks plunging as much as 12% amid mounting panic across trading desks. Before the slump, the Kospi Index — a poster child for AI investments — was the world’s best-performing gauge. Japanese shares fell 3.7%, Hong Kong dipped 2.6% and India dropped 2%. Dubai stocks slipped 4.7% as trading resumed.
While Asia saw sharp declines, equity-index futures signaled only modest losses for the US and Europe.
“Asian markets are choking on a toxic cocktail — surging energy prices, a resurgent dollar, and geopolitical tensions that nobody is sleeping through anymore,” said Hebe Chen, a senior market analyst at Vantage Global Prime. “This isn’t just a technical pullback but more of a psychological capitulation.”
The big moves in Asian stocks were in contrast to other markets, after President Donald Trump provided assurances on safeguarding shipping through the Strait of Hormuz helped calm nerves.
Brent crude gained 2.1% — compared with jumps of 4.7% and 7.3% in the past two days — and gold gained 1.4%. The Bloomberg Dollar Spot Index was up 0.2%. Treasuries were a touch weaker, with the yield on the benchmark 10-year up one basis point to 4.07%, after bond markets tumbled earlier in the week.
Dubai stocks fell 4.7% as trading resumed.
The US-Israeli attack on Iran has destabilized the Middle East and threatens to deliver a new inflationary shock to the global economy by pushing up oil prices. There’s also no clear sense of when or how the war will end, raising the prospect of a prolonged conflict and unforeseen consequences beyond the White House’s control.
The war continued to reverberate across the Middle East, with Israel bombarding Tehran in a fresh wave of strikes. The Islamic Republic fired missiles at Qatar, Bahrain and Oman, with Doha saying targets weren’t limited to military interests. Qatar and Iraq halted production at major energy sites.
“The risk here is the scale of the supply shock the war will create,” wrote Kyle Rodda at Capital.com. “Given the very chaotic nature of the events and the strong incentive for all combatants to escalate right now, this uncertainty could drag on for a while.”
This conflict is different from Trump’s trade war, his talk of invading Greenland or his assault on the Federal Reserve’s independence, all of which unnerved investors globally.
In each case, traders came to expect that Trump would backtrack if markets fell too far, a strategy that came to be known as the TACO trade, which stands for Trump Always Chickens Out — and created a buy-the-dip mentality that allowed stocks to rally back.
“For now, markets are trading headline to headline,” said Fawad Razaqzada at Forex.com. “Much will depend on whether tensions stabilize — or whether this proves to be the start of a more prolonged disruption to global supply.”
What Bloomberg strategists say…
Asia’s equities are likely to extend their declines as long as traders remain anxious that crude prices may shoot even higher than current levels. The region’s dependence on oil and gas from the Middle East means the extreme volatility breaking out in crude futures is likely to ensure Asia-Pacific shares will keep sliding as investors are forced to keep worst-case scenarios in mind.
— Garfield Reynolds, MLIV Team Leader. For full analysis, click here.
Markets are focused on oil as traders weighed Trump’s plan to insure and escort tankers passing through the Strait of Hormuz, with traffic in the vital waterway all but halted. Oil extended gains, with Brent hovering just above $82 a barrel after rallying about 12% over two days, the biggest gain since 2020.
“When considered alongside other headlines, it’s questionable whether that alone is enough to reassure markets,” Hitoshi Asaoka, chief strategist at Asset Management One, said about Trump’s comments.
Oil’s advance and the dollar’s strength are a combination that’s not ideal for Asian economies. The dollar’s two-day gain is the most in nearly a year. A gauge of Asian currencies fell to the lowest since January this week, with the decline limited as China sought to anchor the yuan.
Even after the losses this week, Asian stocks are up about 5% this year, on top of a 25% jump in 2025. Equities have rallied since their slump in April — caused by Trump’s tariffs announcement — on bets the billions spent by companies on artificial intelligence will pay off.
“A lot of markets have done very, very well year-to-date,” George Efstathopoulos, a portfolio manager at Fidelity International, said on Bloomberg Television. “So we’re seeing a bit of positioning sort of lightening. But at the same time, I would argue it depends on how protracted this ends up being.”
Some of the main moves in markets:
Stocks
S&P 500 futures fell 0.6% as of 3:02 p.m. Tokyo time S&P/ASX 200 futures fell 1.9% Japan’s Topix fell 3.9% Hong Kong’s Hang Seng fell 2.8% The Shanghai Composite fell 1.2% Euro Stoxx 50 futures fell 0.3% Currencies
The Bloomberg Dollar Spot Index rose 0.2% The euro fell 0.2% to $1.1591 The Japanese yen was little changed at 157.61 per dollar The offshore yuan fell 0.2% to 6.9300 per dollar Cryptocurrencies
Bitcoin rose 0.1% to $68,117.85 Ether was little changed at $1,968.64 Bonds
The yield on 10-year Treasuries advanced one basis point to 4.07% Japan’s 10-year yield declined 1.5 basis points to 2.115% Australia’s 10-year yield declined two basis points to 4.75% Commodities
West Texas Intermediate crude rose 1.7% to $75.81 a barrel Spot gold rose 1.1% to $5,144.66 an ounce This story was produced with the assistance of Bloomberg Automation.
–With assistance from Winnie Hsu, Joanne Wong, Aya Wagatsuma and Carter Johnson.
©2026 Bloomberg L.P.
