Asian Markets Rally Led by Chip Stocks; Middle East Tensions Lift Oil Prices, Fed Rate Hike Expectations Advance

Asian markets edged higher on Thursday, led by a strong rebound in chip stocks. Renewed optimism over artificial intelligence-driven demand has bolstered investor sentiment toward semiconductor equities. Meanwhile, sustained U.S. strikes on Iran have escalated geopolitical tensions in the Middle East, pushing international crude oil prices higher. At the macro level, resurgent inflation concerns have prompted markets to pull forward Federal Reserve rate hike expectations, driving U.S. Treasury yields up and stabilizing gold prices after a three-day losing streak.

1. Asian Equities Rebound Broadly, Chip Stocks Lead the Gains

Major Asia-Pacific stock indices traded higher, with the MSCI Asia Pacific Index rising 0.7%. South Korea’s KOSPI, a key benchmark for chip and AI investment sentiment, surged more than 3%. Nasdaq 100 futures, which track technology-heavy stocks, erased early losses and climbed 0.2%.

Strength across the semiconductor sector fueled broader market momentum. SK Hynix’s U.S. listing garnered over seven times oversubscription, driving its Seoul-listed shares up 7.8% and drawing robust capital inflows into the chip segment. Separately, Bain Capital has fully exited its stake in flash memory maker Kioxia Holdings. Even amid the major shareholder’s complete divestment, Kioxia’s share price has skyrocketed more than 650% year-to-date, underscoring the sector’s strong fundamental momentum.

The latest chip rally reversed earlier weekly weakness. Despite Samsung Electronics reporting a 19-fold surge in profits earlier this week, the result failed to lift market confidence, triggering a selloff in semiconductor stocks. Following a sharp market slump on Wednesday, investors rotated back into technology names, with long-term growth prospects for AI effectively offsetting broader macroeconomic headwinds.

2. Middle East Turmoil Roils Commodities; Oil Rises for Third Straight Day, Gold Stabilizes

International crude oil extended its upward trajectory, notching a third consecutive daily gain. Brent crude briefly topped $79 per barrel before paring some advances. Persistent U.S. airstrikes on Iran have stoked market fears that escalating Middle East tensions could disrupt shipping in the Strait of Hormuz, threatening global crude supply chains and serving as the key catalyst for rising oil prices.

In precious metals markets, gold halted its three-day decline and steadied in Asian trading, hovering around $4,075 per ounce.

3. Global Bonds Sold Off, Fed Rate Hike Timeline Brought Forward

Global bond markets faced broad selling pressure on Wednesday, triggering a notable shift in market expectations for Federal Reserve monetary policy. U.S. Treasury bonds saw muted moves in early Asian trading, but yields rose sharply during the U.S. session. The 2-year U.S. Treasury yield, highly sensitive to Fed policy shifts, climbed 5 basis points to 4.23%, just 1 basis point below its monthly high. The 10-year Treasury yield also rose 4 basis points, hitting its highest level since late May.

Driven by inflation fears stemming from escalating Middle East tensions and soaring oil prices, money markets have advanced the expected timing of the next Fed rate hike from December to October. Minutes from the Fed’s June policy meeting revealed that while most officials acknowledged a case for raising interest rates, they ultimately voted to hold borrowing costs steady. The minutes also signaled easing concerns over the labor market but heightened worries about upside inflation risks.

Senior market strategists noted that the breakdown of the U.S.-Iran ceasefire and escalating regional conflicts could trigger a new round of accelerated inflation, forcing the Fed to tighten monetary policy further. U.S. Central Command stated via social media that the additional strikes aim to “further degrade their ability to threaten freedom of navigation in the Strait of Hormuz”, with lingering geopolitical uncertainty set to continue weighing on global commodity and capital markets.

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