Published Fri, Jul 24, 2026 · 09:32 AM — Updated Fri, Jul 24, 2026 · 12:00 PM
ASIAN stocks followed Wall Street lower as investors grew sceptical that the billions being poured into the artificial intelligence buildout will generate adequate returns. Brent traded above US$100 a barrel.
The MSCI Asia-Pacific Index fell 1 per cent, with gauges in Japan and South Korea both dropping more than 2 per cent. Chip bellwethers Samsung Electronics, SK Hynix and Kioxia each lost more than 3 per cent.
Among the main moves across markets, the S&P 500 futures were little changed as at 9.56 am Tokyo time. The Hang Seng futures fell 1.3 per cent, Japan’s Topix fell 1.3 per cent and Australia’s S&P/ASX 200 fell 0.6 per cent.
“Investors are already feeling increasingly jittery about the sustainability of the AI rally,” said Gerald Gan, chief investment officer at Reed Capital. “That said, any short-term correction is likely to attract dip buyers once again. For now, the music has not stopped.”
Further weighing on sentiment, Brent traded at around US$100.30 a barrel. Higher oil prices drove Treasuries lower and lifted the US dollar during the US session as traders priced in greater inflation risks and the prospect of higher interest rates.
The moves came as US President Donald Trump threatened to escalate the conflict with Iran after Houthi militants attacked two Saudi Arabian oil tankers in the Red Sea, raising the risk of disruptions to global energy supplies.
The jump in energy prices has compounded a tech-led market sell-off as investors grapple with doubts over returns from AI spending and the prospect of more persistent inflation.
Higher oil prices have complicated the Federal Reserve’s policy outlook ahead of next week’s meeting, with money markets now fully pricing in a rate increase by September.
“Escalating Middle East tensions have pushed crude prices higher, raising concerns that inflation could re-accelerate and delay interest rate relief, maybe even cause the Fed to hike,” said Sameer Samana at Wells Fargo Investment Institute.
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“We think oil prices eventually normalise, but appreciate that things may get worse before they get better.”
The market is also contending with a spate of attacks at the Caspian Pipeline Consortium terminal on Russia’s Black Sea coast, which exports most of Kazakhstan’s crude.
Inventories across the globe are depleted by months of conflict, raising the risk of a supply squeeze that threatens to weigh on the global economy if prices continue to climb.
“Round two of the military conflict is going to be broader than round one,” Bob McNally, president of Rapidan Energy Group and a former White House official, said in a Bloomberg Television interview, referring to the Iran war.
“The risks are great, not only to shipping, but also to energy infrastructure.”
Earlier, European Central Bank president Christine Lagarde laid the groundwork for a possible interest rate increase in September after policymakers unanimously left the deposit rate at 2.25 per cent.
In other corners of the market, gold traded around US$4,050 an ounce after a 2 per cent drop on Thursday as bets on rate hikes reduced the appeal for the non-interest-bearing metal.
Australian and New Zealand bonds declined in early Friday trading. US Treasury yields rose to their highest levels of 2026 as the threat of escalation in the Iran war sent oil prices higher and boosted bets that the Fed could raise rates as soon as next week.
The yen held its losses from the prior session, trading around 163.93 per US dollar, after Japan’s key inflation gauge picked up for the first time in three months, keeping the Bank of Japan on course for another interest rate hike this year.
In tariff-related news, the US will collect duties of between 10 per cent and 12.5 per cent on imports from most major trading partners, its biggest move yet to reconstruct Trump’s tariff wall that was pierced by the Supreme Court.
Meanwhile, the geopolitical backdrop is adding to investor scrutiny of the AI trade, with markets increasingly demanding evidence that massive spending on artificial intelligence will generate commensurate earnings growth.
Alphabet fell 7.1 per cent after raising its capital expenditure forecast, while Tesla tumbled 15 per cent as profits disappointed despite strong electric vehicle deliveries.
Alongside Alphabet, Meta Platforms, Microsoft and Amazon.com telegraphed in April that they would be spending as much as US$725 billion in 2026 on AI ambitions.
“In terms of AI investment, the entire thematic is intact,” Jun Bei Liu, co-founder of hedge fund Ten Cap Investment Management, said on Bloomberg TV.
“The only thing is the valuation part. The extremely expensive parts of the AI trade are going to be under a little more pressure. It is going to have to be led by earnings itself.” BLOOMBERG
