South Korea's stock market was forced to halt trading for 20 minutes on Monday after the Kospi index plunged by nearly 9% within minutes of opening – the third time this year the circuit breaker has been triggered. The index closed down 8.3%, led by chipmakers Samsung and SK Hynix, which fell 10% and 6% respectively.
The carnage in Seoul was part of a broader rout that swept across Asia and Europe, sparked by a sharp sell-off in US tech stocks on Friday that saw the Nasdaq lose about 4% – its biggest drop in more than a year. Japan's Nikkei index fell 3.8%, while Hong Kong's Hang Seng and the Shanghai Composite closed lower. European markets opened weaker: Germany's Dax fell 0.9%, and the UK's FTSE 100 slipped 0.2%, though it later edged higher. Shares in European chip firms were hit hard – BE Semiconductor dropped 4.5%, ASML fell 3.2%, and Aixtron lost almost 6%.
“South Korea's Kospi halted trading after plunging nearly 9% as global tech sell-off and Middle East strikes rattled markets.”
The turmoil comes as investors reassess the valuations of artificial intelligence stocks after a powerful run. “The burden of proof has gone up,” said Charu Chanana, chief investment strategist at Saxo, noting that investors are looking for “clear signs that AI demand has translated into real revenue”. Jensen Huang, boss of Nvidia, a key client of Taiwan's TSMC (which fell 3%), described the slide as a buying opportunity.
Adding to the jitters, oil prices surged on renewed conflict in the Middle East. Iran and Israel exchanged strikes for the first time since a ceasefire was agreed in April, fuelling inflation fears. Brent crude jumped nearly 5% to $97.60 a barrel before falling back to $94.60 after Iran announced it was halting military operations against Israel, following calls from Donald Trump for both sides to “immediately stop shooting”. The rise in energy prices compounded worries about persistent inflation and the prospect of higher US interest rates, after the US unemployment rate came in lower than expected in April.
South Korean President Lee Jae-myung said the stock market was expected to experience volatility but that domestic shares remained “slightly undervalued”. Yet investors remain nervous about how tech companies will fund their “eye-watering” spending plans on AI infrastructure, and whether the boom will deliver real revenue. As one market watcher put it, the recent run has left markets exposed to a “messy mix” of shocks.