Asian Chip Stocks Plunge Amid US-Iran Tensions and Interest Rate Hikes

Global markets opened with mixed trends on Tuesday, heavily influenced by escalating tensions between the US and Iran following recent American strikes near Tehran. In Asia, the South Korean KOSPI index led losses, dropping 4.8% after the Bank of Korea raised interest rates by 0.25% to 2.75%, marking the first hike in over three years. Japan’s Nikkei fell 2.5%, and China’s Shanghai Composite declined by 1%, while Hong Kong’s Hang Seng index rose 2.1%, boosted by Alibaba’s 5% surge after announcing integration of its AI model Qwen with Apple services in China.

Technology and semiconductor stocks suffered steep declines, with South Korean chipmaker SK Hynix plunging over 9%, erasing gains from the previous day amid rapid profit-taking and concerns over global AI infrastructure spending. Samsung Electronics dropped more than 7%, Seoul Semiconductor lost over 5%, Samsung SDI fell over 2%, and LG Innotek declined about 1%. In the US, futures indicated a stable to slightly positive open, with the S&P 500 and Dow Jones up 0.1% and Nasdaq steady.

Wall Street closed higher Monday, led by a 0.6% rise in the Nasdaq, following softer-than-expected US producer price inflation data and comments from New York Fed President John Williams suggesting inflation has peaked. Asset manager BlackRock surged after reporting record assets under management of $15.3 trillion, while Morgan Stanley’s trading revenues jumped 69%. PayPal’s shares soared on a $53 billion buyout offer from Stripe and Advent International. Conversely, hardware and chip sectors showed weakness, with Micron, Dell, Intel, and Western Digital retreating. Dutch chip equipment maker ASML bucked the trend, rising 2% after raising its 2026 sales forecast.

In commodities, oil prices rose for the fourth consecutive day amid renewed US attacks on Iranian military sites and ongoing naval blockades, raising fears of broader conflict and supply disruptions through the Strait of Hormuz. Brent crude futures slipped 0.4% to $84.50 per barrel early Tuesday, while WTI fell 0.4% to $79.30. Analysts warn oil could test $100 per barrel if tensions persist. Gold prices declined 0.7%, pressured by expectations of prolonged higher interest rates despite geopolitical risks.

US Federal Reserve Chair Kevin Warsh testified that inflation remains a concern despite recent data, emphasizing no tolerance for high inflation and monitoring AI investment impacts on prices. Upcoming US economic data, including retail sales and jobless claims, will influence market expectations for future interest rate moves. Separately, the US announced a 25% tariff on most Brazilian imports starting July 22, citing unfair trade practices, potentially escalating diplomatic tensions ahead of Brazil’s October presidential election.