Tech Rout Triggers Global Selloff as Iran-Israel Tensions Spike, June 09

Global stock markets swung sharply on Monday as investors dumped technology shares over fears that artificial intelligence investments are overvalued. South Korea’s Kospi index fell 8.3% and triggered a circuit breaker halt, while Japan’s Nikkei dropped 3.9%. The selloff followed Friday’s 4.2% Nasdaq plunge after strong US jobs data raised expectations of Federal Reserve rate hikes. Renewed conflict between Iran and Israel pushed oil prices higher, adding inflation concerns to the mix.

Asia Takes the Heaviest Hit

South Korea’s stock market suffered the steepest losses as the Kospi index fell 8.3% on Monday, triggering a 20-minute trading halt for the third time this year. The circuit breaker mechanism is designed to prevent panic selling. Japan’s Nikkei 225 dropped 3.9% to 64,024.60, while Taiwan’s TAIEX fell 3.5%. Chip giants Samsung Electronics and SK Hynix both fell sharply, dropping 10.2% and 7.6% respectively. Markets like South Korea and Japan are particularly exposed to tech shocks because their exchanges are dominated by semiconductor and AI-related stocks.

Wall Street Rebounds as Investors Buy the Dip

US markets recovered some losses on Monday. The Nasdaq rose 1.2%, the S&P 500 opened 0.7% higher, and the Dow Jones Industrial Average was up 0.2%. Memory chipmaker Micron Technology surged 10% after falling 13% on Friday. Investors bought the dip following Friday’s rout, with the iShares Semiconductor ETF jumping 6% after plunging 10% the previous day. Analysts noted that investors have been conditioned over 15 years to purchase stocks after sharp declines.

AI Fears and Rate Hike Worries Drive the Selloff

Friday’s sharp market drop stemmed from a strong US jobs report showing 172,000 new positions added in May, below expectations but solid enough to fuel rate hike concerns. Tech stocks have rallied strongly in recent weeks on AI investment enthusiasm, but investors are now repositioning over fears AI investments may be overvalued. Saxo’s chief investment strategist described the market as facing a “messy mix” of shocks tied to the tech sector and accelerated by rising energy prices.

Middle East Tensions Push Oil and Inflation Concerns Higher

Iran and Israel exchanged strikes on Monday for the first time since a ceasefire was agreed in April. Oil prices surged initially, with Brent crude jumping to $98 a barrel before settling at $94.58 after Iran announced an end to military operations. The spike fuelled inflation concerns across global markets. European markets fell, though less sharply than Asia, while London’s FTSE 100 closed up just 0.05% at 10,373 points. Housebuilders’ shares fell on concerns that Middle East conflict could push up borrowing costs.

Final Thoughts

Markets face competing pressures: AI valuation concerns, potential rate hikes, and Middle East tensions. With the Nasdaq up 1.2% on Monday but Asia still reeling, investors should watch whether tech recovers or faces deeper losses ahead.

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