Trading on South Korea’s Kospi index was suspended for 20 minutes on Monday after it plunged almost 9% within minutes of opening – a circuit breaker triggered for the third time this year as fears over overvalued AI stocks and renewed conflict in the Middle East sent shockwaves through global markets.
The index eventually closed 8.3% lower, with chipmakers Samsung down 10% and SK Hynix falling sharply, while Japan’s Nikkei 225 dropped 3.9%. European markets also traded lower, though falls were less severe than in Asia, as investors absorbed a “messy mix” of shocks, said Charu Chanana, chief investment strategist at Saxo. Tech stocks have enjoyed a strong run in recent weeks but investors are “repositioning” over concerns that investments into artificial intelligence may be overvalued, she added. “The burden of proof has gone up.”
“Global markets hit by tech sell-off and oil price spike after Iran and Israel exchange strikes.”
The sell-off followed a sharp decline on Wall Street on Friday, where the tech-heavy Nasdaq lost nearly 5% – its biggest drop in more than a year – after a strong US jobs report raised the prospect of interest rates staying high or even climbing further. The S&P 500 fell 2% on a weekly basis, ending nine weeks of gains.
Adding to the turmoil, oil prices spiked after Iran and Israel exchanged strikes for the first time since a ceasefire was agreed in April. Brent crude rose 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 volatility fueled inflation fears, further rattling markets.
In the UK, the FTSE 100 reversed early losses to trade slightly higher, though jet engine maker Rolls-Royce and British Airways parent IAG were among the biggest fallers. Shares in oil companies BP and Shell rose on higher crude prices.
South Korean President Lee Jae-myung said the stock market was expected to experience volatility but he believed domestic shares were still “slightly undervalued”.
Shares in European companies at the heart of the AI boom also fell sharply at the start of trading. Chip firms BE Semiconductor Industries dropped 4.5% and ASML fell 3.2%, among the biggest fallers on the pan-European Stoxx 600 index, which was down almost 0.9%. The German tech firm Aixtron lost nearly 6%, while Finland’s Nokia fell 5%.
US markets opened higher on Monday, recovering some losses from Friday, with the S&P 500 gaining 1% in early trading as chip shares led the recovery. But the broader mood remained cautious as investors sought “clear signs that AI demand has translated into real revenue”, Chanana said.