Stocks Drop as AI Trade Falters, Oil Gains on Iran: Markets Wrap
(Bloomberg) — Asian stocks dropped as technology shares remained under pressure and tensions in the Middle East escalated after US forces struck Iran. Crude oil edged up.
The MSCI Asia Pacific Index fell 1% as selling in tech stocks resumed, paring some of Tuesday’s rebound, and putting the benchmark on track for a fourth loss in five sessions. South Korea’s Kospi, a proxy for artificial intelligence spending, led regional declines, dropping over 2% as chipmakers slid. A gauge of Asian tech stocks dropped 1.9%.
Brent crude rose 0.9% to about $92.30 a barrel after US forces hit Iran following the downing of an American helicopter. The gains pared after the US forces said they had completed the strikes. Brent had earlier risen to as high as $93.26 a barrel.
The dollar, the haven of choice since the Middle East conflict began, strengthened against almost all its Group-of-10 peers as the attacks threatened the fragile ceasefire as well as efforts to secure a deal to reopen the Strait of Hormuz.
Volatility is rising across markets as traders grapple with a growing list of risks: stretched valuations, escalating tensions in the Middle East, rising oil prices that threaten to fuel inflation, and mounting expectations that the Federal Reserve will need to raise interest rates. Eyes now turn to Wednesday’s inflation report, which may provide the clearest signal yet on whether rates will stay elevated for longer.
Read: Bond Trader Positioning Signals Fed Rate Hikes Are Coming Fast
“Exuberance has been building for months, pushing stocks to one record after the next,” said John Cunnison, chief investment officer at Baker Boyer Bank. “So anything perceived to be negative for equities — from higher inflation to even the potential for rate hikes — will knock the market off its footing after a historic run.”
The retreat in technology shares on Wall Street coincided with a broadening rally across the rest of the market, as nine of the S&P 500’s 11 sectors advanced Tuesday. Defensive corners led the gains.
The rotation offered a contrast to a rally that has been increasingly concentrated in a handful of technology giants.
“As much as we love to see tech’s leadership, it would be constructive to see this rally broaden out to other sectors,” said Bret Kenwell at eToro. “When leadership is concentrated in one corner of tech, the market’s foundation gets a little wobblier.”
In other corners of the market, contracts for the S&P 500 and the Nasdaq 100 indexes edged lower by 0.1% after the Wall Street benchmarks had a volatile session on Tuesday, with chip stocks coming under pressure.
The yen hovered near its weakest level since April, keeping traders on alert for possible intervention by Japanese authorities to support the currency. Gold dropped 1.4% to about $4,200 an ounce.
The attacks pose a new threat to the peace accord that Trump has said for weeks was close. Iran’s Foreign Minister Abbas Araghchi said in a post on X that the country “will leave no attack or threat unanswered.”
“The biggest economic threat may be the gradual acceptance that this confrontation is becoming increasingly entrenched, creating a cycle of recurring instability,” said Nigel Green, CEO of global financial advisory deVere Group.
Attention now turns to Wednesday’s US inflation report. While oil has retreated from multiyear highs reached in April, strong US jobs data last week has increased bets that the Fed will need to raise interest rates.
Higher US interest rates tend to drain capital from emerging markets, strengthen the dollar and raise borrowing costs, creating a tougher backdrop for equities.
Economists surveyed by Bloomberg expect annual CPI inflation to accelerate to 4.2% in May from 3.8% a month earlier. Core inflation, which excludes food and energy, is projected to edge up to 2.9% from 2.8%.
“The combination of stronger payrolls and uncomfortably elevated inflation has left markets penciling in higher odds of the Fed having to tighten policy,” said Gennadiy Goldberg, head of US rates strategy at TD Securities. “This has continued to leave yields elevated, though risk-off moves in equities appear to be helping to backstop yields.”
Some of the main moves in markets:
Stocks
S&P 500 futures fell 0.1% as of 10:37 a.m. Tokyo time Japan’s Topix fell 0.6% Australia’s S&P/ASX 200 rose 0.6% Hong Kong’s Hang Seng fell 0.5% The Shanghai Composite fell 0.3% Euro Stoxx 50 futures rose 0.4% Currencies
The Bloomberg Dollar Spot Index was little changed The euro was little changed at $1.1539 The Japanese yen was little changed at 160.38 per dollar The offshore yuan was little changed at 6.7761 per dollar The Australian dollar was little changed at $0.7028 Cryptocurrencies
Bitcoin fell 0.7% to $61,674.55 Ether fell 1.4% to $1,636.73 Bonds
The yield on 10-year Treasuries advanced two basis points to 4.53% Japan’s 10-year yield was unchanged at 2.680% Australia’s 10-year yield declined three basis points to 4.89% Commodities
West Texas Intermediate crude rose 0.7% to $88.86 a barrel Spot gold fell 1.4% to $4,200.11 an ounce This story was produced with the assistance of Bloomberg Automation.
–With assistance from Carmeli Argana and Tatiana Darie.
©2026 Bloomberg L.P.
