Semiconductor sell-off hits Asia-Pacific stock markets, Korean stocks plunge 7% triggering circuit breaker, Brent crude rises for four consecutive days to stand above $85.

Semiconductor sell-off hits Asia-Pacific stock markets, Korean stocks plunge 7% triggering circuit breaker, Brent crude rises for four consecutive days to stand above $85.

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A new round of sell-offs in semiconductor stocks weighed on Asian stock markets, raising fresh doubts about the sustainability of AI trading. Meanwhile, escalating tensions in the Middle East pushed oil prices higher for the fourth consecutive day.

South Korea’s KOSPI Index extended its decline to over 7% on Wednesday, with SK Hynix and Samsung Electronics accounting for the bulk of the drop. Tokyo-listed Kioxia Holdings fell more than 13%, and the Nikkei 225 at one point dropped as much as 3%. This wave of sell-offs dragged the MSCI Asia-Pacific Stock Index down 1.5%, ending a two-day winning streak.

Meanwhile, Brent crude rose for the fourth day in a row, breaking above $85.25 per barrel. The U.S. launched a new round of airstrikes against Iran, intensifying market concerns about potential disruptions to Middle Eastern energy supplies.

The chairman of South Korea's Financial Services Commission stated that authorities will soon announce related measures for leveraged ETFs, in response to controversy over leveraged ETFs linked to Samsung and SK Hynix exacerbating stock market volatility. Additionally, the Bank of Korea raised its benchmark interest rate from 2.50% to 2.75%, in line with market expectations.

Chip Stock Sell-Off Intensifies, AI Trading Resilience Put to the Test

The semiconductor sector remains under pressure, becoming the core driver of the current decline in Asian stock markets.

After months of sharp stock price increases, investors are demanding more compelling evidence that a surge in AI capital expenditure will translate into sustained overall profitability growth for the semiconductor supply chain. Bloomberg strategist David Savage pointed out that the market's tepid response to ASML’s strong earnings has deepened a worrying trend—even robust preliminary results from Samsung Electronics and solid sales data from TSMC have so far failed to support increasingly fragile chip stock rallies.

ASML has already raised its full-year sales forecast for the second time this year and, according to The Information, plans to increase prices for its chip manufacturing equipment, citing four sources. Despite this, market response remains muted. TSMC is set to release its earnings report later tonight, seen as the next key point for assessing the progress of AI infrastructure construction. David Savage said that, as Asia's largest company by market value, TSMC faces extremely high expectations, and whether it can reverse overall regional market sentiment remains to be seen.

Korean Market Triggers Circuit Breaker, Regulators Respond Urgently

The sharp drop in South Korea's stock market triggered market protection mechanisms. KOSPI200 index futures fell more than 5%, prompting the Korea Exchange to initiate the "sidecar" mechanism, suspending program trading in the KOSPI. The Nikkei 225 at one point fell as much as 3%.

The remarks by the chairman of Korea’s Financial Services Commission reflect the regulators’ vigilance regarding market volatility. Leveraged ETFs linked to Samsung and SK Hynix have recently been blamed for amplifying stock price swings, and authorities have pledged to soon introduce countermeasures. On the same day, the Bank of Korea announced a 25-basis-point rate hike, raising the benchmark rate to 2.75%, in line with market expectations.

Middle East Tensions Escalate, Oil Prices Continue Rising

Geopolitical risks are another driving force behind the surge in oil prices.

The temporary U.S.-Iran peace agreement signed about a month ago has nearly collapsed over the past week, with both sides disputing control of the Strait of Hormuz. Most energy exports from Saudi Arabia, Qatar, and the UAE pass through this passage. Trump said he would intensify airstrikes until Iran stops attacking Hormuz Strait vessels and agrees to open the waterway.

According to Xinhua News Agency, the spokesman for Iran's Islamic Revolutionary Guard Corps posted on social media in the early hours of the 16th, stating that Iran's current actions focus on destroying the United States' "offensive infrastructures" in the region, and the next steps will follow. The spokesman wrote: "The enemy should not think it can continue the current combat situation and drag the war into a war of attrition."

TradeStation's David Russell said: "The Federal Reserve faces no pressure to raise rates in the short term, but from a longer-term perspective, oil prices are the dominant factor. The energy sector supported the market in June, but if the Strait of Hormuz remains closed, that history may soon become a thing of the past."

Inflation Data Eases Fed Rate Hike Expectations, Bond Market Strengthens

Beyond volatility in stocks and oil, the bond market has benefited from cooling inflation data.

U.S. Producer Price Index (PPI) for June came in below expectations, pushing U.S. Treasury prices higher on Wednesday and prompting traders to further lower their expectations for Fed rate hikes this year. Boosted by this, government bonds in Australia and New Zealand also rose. The yield on the two-year U.S. Treasury continued to fall from its 2026 high.

The core dilemma for the market now is: Softer inflation data gives the Fed room to stay put, but the risks to energy prices posed by continued deterioration in the Middle East could soon reopen the valve on inflationary pressures, complicating the outlook for monetary policy over a longer time frame.

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