Asian shares rose on Thursday as investors kept buying stocks tied to artificial intelligence even as Brent crude climbed above $98 a barrel on intensifying war in Iran and wider Middle East tensions. The gains came while the U.S. military carried out a new round of strikes on Iran at President Donald Trump’s direction, marking a 12th successive night of American attacks and prompting further Iranian retaliation. Ordinary people get the bill. The markets get the bounce.
Who Pays for the Surge
The MSCI Asia-Pacific index ex-Japan rose about 1%, South Korea’s KOSPI jumped more than 3%, and Japan’s Nikkei added about 0.7% in Reuters’ market wrap. AP reported the KOSPI gained 4.4% to 7,096.89, the Nikkei 225 rose 0.5% to 66,422.60, Hong Kong’s Hang Seng climbed 1.3% to 25,210.81, the Shanghai Composite added 0.3% to 3,876.78, Australia’s S&P/ASX 200 gained 0.2% to 8,839.00, Taiwan’s Taiex edged 0.1% higher, and India’s Sensex fell 0.6%.
Reuters said the gains in Asia reflected confidence that the artificial intelligence capital-expenditure cycle was still intact, with stronger cloud growth helping validate heavy spending on AI infrastructure. Charu Chanana, chief investment strategist at Saxo in Singapore, said, "U.S. megacaps may face more scrutiny because they are writing the cheques, while chipmakers, memory suppliers and infrastructure companies get paid earlier in the investment cycle." That’s the hierarchy in plain sight: the giants write the checks, the suppliers cash in, and everyone else lives with the consequences of the spending race.
Reuters said SK Hynix and Samsung Electronics led the KOSPI higher, and that Alphabet and Tesla earnings on Wall Street showed no sign of a slowdown in spending on AI infrastructure. Reuters also said Google-parent Alphabet had sharply raised its capital expenditure plans for the year. AP said investors’ appetite for AI-related stocks revived despite a retreat on Wall Street, with Samsung Electronics up 3.7% and memory chipmaker SK Hynix up 4.9%. In Tokyo, technology companies led gains, with SoftBank Group climbing 3.8%.
Oil, Inflation, and the Cost Below
Oil prices were a major driver of the session. Reuters said Brent jumped 4% to nearly $98 a barrel, while AP said Brent crude was up 4.3% at $98.16, its highest level since early June. AP said the U.S. benchmark crude gained 3.6% to $89.91 a barrel. Reuters said the rise in oil pushed Germany’s 10-year bund yield above 3.2% for the first time since the euro zone debt crisis in 2011 and sharpened focus on the European Central Bank meeting later in the day.
AP said rising oil prices were weighing on stocks because they raise costs for most businesses and can dent consumer spending, and that higher oil prices were threatening a reacceleration of inflation that could push the Federal Reserve and other central banks to raise interest rates. That’s the familiar squeeze: war drives oil higher, oil drives costs higher, and the people at the bottom absorb the shock through prices, wages, and tighter money.
Reuters said the renewed surge in oil prices followed the re-escalation of the conflict in the Middle East between the United States and Iran. It said the Iran-aligned Houthis said they had struck two Saudi oil tankers as part of a naval blockade on Saudi Arabia, threatening a second chokepoint on global oil supplies alongside Iran’s near-closure of the Strait of Hormuz. AP said continued fighting was preventing oil tankers from using the Strait of Hormuz to exit the Persian Gulf, and that normally a fifth of all oil and natural gas traded passes through the narrow strait.
The Central Banks Watch the Damage
Reuters said the euro rose toward a one-week high at $1.1429 as traders positioned for the ECB meeting, while the Japanese yen was back at a 40-year low versus the dollar after a brief lift faded. AP said the U.S. dollar was trading at 163.36 yen as the Japanese currency wavered near its lowest level in 40 years, and that expectations the gap between U.S. and Japanese interest rates would widen because of higher inflation in the U.S. had helped push the dollar higher against the yen.
Reuters said Japan’s BOJ-sensitive 2-year government bond yield hit a 31-year high in Tokyo on faster rate-hike bets, and Japan’s finance minister issued verbal warnings about possible intervention, saying the government was ready to take decisive forex action as needed. Reuters quoted Societe Generale FX strategist Kit Juckes as saying, "The consensus view blames a timid BOJ (for the recent yen fall), but I think the problem is that higher oil prices have dashed hopes of 1.5% GDP growth this year." AP said the euro was unchanged at $1.1414 in other dealings early Thursday.
The whole machine keeps moving. Stocks rise on promises of AI spending, oil spikes on war, currencies lurch under the pressure, and central bankers prepare to manage the fallout after the damage has already been done.