Asian stocks fall as higher crude prices put pressure on market

Asian stocks fell on Friday after a tech-led sell-off on Wall Street, as investors speculated that massive spending on artificial intelligence infrastructure may not deliver adequate returns, while oil prices held near multi-month highs on fears of a widening West Asia conflict.

Asian markets opened with major cuts, Japan's Nikkei tumbled 2.33%, in addition, another Tokyo-based index, TOPIX also slipped over 1% in early trade. The MSCI Asia Pacific Index fell 0.8% as markets in Japan, South Korea and Australia declined, following a 1.2% drop on the S&P 500 which was the index's steepest one-day fall in a month, and a 1.9% slump on the tech-heavy Nasdaq 100.

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South Korea's benchmark Kospi Index slumped to nearly 3.5%.

Megacap stocks recorded their worst session since the tariff driven retreat of April 2025, reflecting a pullback from risk assets. Nasdaq 100 futures rose 0.1%, offering some stability, while Intel shares climbed 3.5% in extended trading after the chipmaker's forecast exceeded Wall Street expectations.

Brent crude was largely steady in early Asian trade after settling above $100 a barrel on Thursday, its highest close since May. The rally pushed Treasury yields higher and strengthened the dollar amid worries over inflation and further rate increases.

The moves followed a threat from US President Donald Trump to escalate the standoff with Iran, after Houthi militants struck two Saudi Arabian oil tankers in the Red Sea, raising fears of disruption to global energy flows.

The jump in energy prices has reinstated concerns that inflation could be present for longer than expected, complicating the Federal Reserve's policy decisions ahead of its meeting next week.

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Money markets are now fully pricing in a Fed rate rise by September, with traders watching closely for signs that higher oil prices are feeding into broader inflation and corporate earnings.

Strains on global energy supply chains have deepened as a result of the latest escalation. Fighting linked to Iran has already disrupted shipping through the Strait of Hormuz, while the Red Sea attacks now threaten the alternative export route Saudi Arabia has relied on to keep crude flowing.

Separately, a series of attacks on the Caspian Pipeline Consortium terminal on Russia's Black Sea coast through which most of Kazakhstan's crude is exported has added further pressure.

With global inventories already depleted after months of conflict, analysts warn of a growing risk of a supply constraint that could weigh on the wider global economy if prices continue to rise.

Gold fell nearly 2% to around $4,050 an ounce on Thursday as expectations of rate hikes weighed on demand for the non-interest-bearing metal. Australian and New Zealand government bonds declined in early Friday trading.

The yen held onto its losses from the previous session, trading near 163.83 per dollar, after a key Japanese inflation gauge rose for the first time in three months, which is likely to keep the Bank of Japan on track for another rate hike this year.

In tariff developments, the US will impose duties of between 10% and 12.5% on imports from most of its major trading partners, marking its most significant step yet to rebuild the tariff regime that was struck down in part by the country's Supreme Court.