SINGAPORE – Stock markets across Asia sank on March 4 as investors began panic-selling on fears an escalating Middle East war will deliver an energy shock that drives up inflation and hurts the global economy.
South Korea was the worst hit as the Kospi plunged 12.06 per cent – its biggest one-day crash on record. Of more than 800 stocks on the benchmark, only 10 finished in the green.
The sell-off dragged the won to a 17-year low.
Japan’s Nikkei slid more than 4 per cent before closing down 3.6 per cent. Hong Kong’s Hang Seng ended 2 per cent lower while Taiwan’s Taiex lost 4.4 per cent.
Singapore’s Straits Times Index fell as much as 120.93 points, or 2.45 per cent, before closing down 2.1 per cent.
Before the slump, the Kospi – a poster child for AI investments – was the world’s best-performing gauge, up nearly 50 per cent at its peak. It has now lost a combined 18.4 per cent in two days, wiping out 817.6 trillion won (S$710 billion) in market value.
The sell-off was driven by the heavyweights that had supercharged the market higher – AI chip giants Samsung Electronics and SK Hynix.
“I heard some of my colleagues gasping ‘What the hell?’” said Ms Jessica Chung, who was one of many tapping intently on phone screens in the Pangyo area of Seongnam, a high-tech hub just south of Seoul.
“I went to the bathroom to find a quiet corner to trade and, guess what, people were queueing outside,” she said, describing the atmosphere as a collective sense of dread.
The widening war in the Middle East and resulting spike in oil prices have triggered a rethink about the artificial intelligence boom that has sent the Kospi soaring because South Korea is almost completely reliant on imports for its energy needs.
Benchmark Brent crude oil futures rose 2.5 per cent to US$83.44 a barrel after rallying about 12 per cent over the past two days, the biggest gain since 2020.
US President Donald Trump said overnight that the US International Development Finance Corporation would offer insurance to vessels to help ensure the flow of energy and other trade, providing a naval escort “if necessary”.
ING Group said in a note: “Naval escorts will be sitting ducks to Iranian attacks. So, the US may choose to wait before escorting vessels until it gauges that Iran’s ability to attack has been degraded.”
The US move follows signs of mounting disruption for producers in the region from the effective closure of the key Strait of Hormuz route.
Additionally, Iraq – the second-biggest OPEC producer – has begun shutting the Rumaila field, the nation’s biggest, and the West Qurna 2 project, according to people familiar with the matter. When complete, the halts will stop a majority of the country’s output.
In Saudi Arabia, major oil storage sites are filling rapidly, according to geospatial analytics company Kayrros.
The global oil market has been pitched into turmoil by the US and Israeli war against Iran, with strikes and counter-strikes spreading across the Middle East.
“It does look like conflict is going to go a little bit longer than what people thought initially. And there’s been escalation, because the war is now broadening out to include allies of the US,” said Mr Damien Boey, portfolio strategist at Wilson Asset Management in Sydney.
“Oil infrastructure seems to be under attack… so people are having to think about what is the duration of all of that.”
Gold resumed gains, rising 1.5 per cent to US$5,166.74 an ounce, after falling 4.5 per cent overnight as traders cashed out of winning bets to cover losses elsewhere.
Futures tied to the US S&P 500 lost 0.3 per cent. Overnight, US stocks pared heavier losses but the S&P 500 closed 0.8 per cent lower on fear over potentially prolonged higher oil prices.
The US dollar paused after two days of haven-driven gains. The euro slid below US$1.16 as investors expect Europe will be hit hard by higher energy costs. Benchmark European gas prices have jumped about 65 per cent in two days.
“For markets to find a floor, we need signs of de-escalation on the war front or status quo, which could then move the focus back to fundamentals,” said Mr Rupal Agarwal, Asia quantitative strategist at Bernstein in Singapore. BLOOMBERG, REUTERS