Global markets stumbled through a volatile Monday as two crises converged: growing doubts about artificial intelligence valuations and escalating military tensions in the Persian Gulf that sent oil prices climbing and raised fresh questions about energy security.
Tehran launched fresh drone and missile attacks on Bahrain and Kuwait over the weekend in response to new U.S. airstrikes, pushing Brent crude up 0.9% to $73.25 a barrel and benchmark U.S. crude 1.2% higher to $70.06. The attacks targeted vessels in the Strait of Hormuz, a critical chokepoint for global oil supplies, exposing the fragility of energy markets even as traders had grown complacent about supply disruptions.
AI Boom Shows Cracks
The selling pressure on AI-related stocks that began Friday continued to ripple through Asian markets, revealing the precarious foundation beneath a rally that's enriched tech giants while leaving broader economic gains uncertain. SoftBank Group, which invests in OpenAI, plunged 5.3% in Tokyo after dropping 12.5% on Friday. Samsung Electronics sank 4.8% in Seoul, and memory chipmaker SK Hynix fell 1.7%, even as South Korea announced plans for more than $500 billion in investments by the two companies in a southwestern chip manufacturing hub.
The volatility underscores mounting concerns that AI valuations have outpaced real-world applications and revenue. On Wall Street Friday, Micron Technology dropped 6.7%, Intel fell 3.4%, Nvidia slipped 1.6%, and AMD declined 2.1%. The technology-heavy Nasdaq composite lost 0.2%.
Japan's Nikkei 225 managed to close 0.2% higher at 69,468.11 after reversing earlier losses. South Korea's Kospi ended 0.2% lower at 8,394.65, narrowing sharper declines from earlier in the session. Taiwan's Taiex, home to chipmaker TSMC and other tech firms that've benefited from the AI boom, gained 1% after falling 3.6% Friday.
Energy Security Concerns Mount
The weekend attacks in the Gulf raised immediate alarms about the vulnerability of critical infrastructure and shipping lanes. ING commodities strategists Warren Patterson and Ewa Manthey warned Monday that oil traders have been "too optimistic" about the timeline for a recovery in Persian Gulf supplies.
"This complacency is odd and clearly leaves significant upside risk if the supply recovery proves slow — or if we see significant re-escalation," they wrote. The attacks on vessels in the Strait of Hormuz have raised fresh questions about maritime safety in a waterway that handles roughly a fifth of global oil traffic.
Brent crude sold for about $72 a barrel before the war began, meaning current prices reflect sustained geopolitical risk premium that's likely to hit consumers at the pump and strain household budgets already pressured by inflation.
Uneven Global Response
Markets across Asia showed divergent responses to the twin pressures. Hong Kong's Hang Seng gained 1.6% to 23,026.68, while the Shanghai Composite index added 1.2% to 4,073.90. Australia's S&P/ASX 200 rose 0.7% to 8,823.40. India's Sensex fell 0.5%.
In early European trading, Britain's FTSE 100 fell 0.2% to 10,487.85. Germany's DAX edged 0.1% higher to 24,694.28. France's CAC 40 slipped 0.4% to 8,349.65.
Currency markets reflected the uncertainty. The U.S. dollar rose to 161.90 Japanese yen from 161.71 yen. The euro traded at $1.1399, up from $1.1385. Reuters reported that broad emerging-market Asia currencies remained stable but muted as investors focused on domestic fundamentals. The Malaysian ringgit rose over 0.6% to 4.063 per dollar and the Indonesian rupiah firmed, while the South Korean won fell about 0.6% and the Taiwanese dollar dipped about 0.2%.
Why This Matters:
The simultaneous pressures on markets reveal deep vulnerabilities in the global economy. The AI sell-off exposes how concentrated wealth creation in tech sectors can amplify systemic risk, with billions in paper gains evaporating as doubts emerge about whether the technology will deliver returns that justify stratospheric valuations. Meanwhile, the escalating conflict in the Persian Gulf threatens energy security at a moment when working families are still recovering from previous inflation shocks. Rising oil prices function as a regressive tax, hitting lower-income households hardest while energy companies reap windfall profits. The attacks on critical infrastructure underscore the need for coordinated international responses and investments in energy diversification to protect consumers from geopolitical shocks beyond their control.