Oil prices surged more than 4% on Wednesday after renewed fighting in the Middle East reignited concerns over energy supplies through the Strait of Hormuz, while a fresh wave of selling in technology stocks extended losses across major Asian markets.
Investor sentiment was also weighed down by caution ahead of the US Federal Reserve`s policy decision later in the day, with markets watching closely for any indication of a tougher stance on inflation and interest rates.
Crude prices climbed sharply after the US military said American and Saudi warplanes had carried out strikes against Iran-backed militants in Iraq, accusing them of launching more than two dozen drone attacks in recent days.
According to US Central Command (CENTCOM), the operation targeted "Iran-aligned terrorists" directed by Iran`s Islamic Revolutionary Guard Corps (IRGC) to attack US forces and Saudi energy infrastructure. CENTCOM also said Iran had attempted to launch multiple ballistic missiles at US forces in the region, but all were intercepted.
Iran later announced it had halted three oil tankers in the Strait of Hormuz, a key shipping route through which around one-fifth of the world`s crude oil and natural gas passes.
The latest escalation ended a three-day lull in hostilities after nearly two weeks of US airstrikes on Iran and retaliatory missile and drone attacks targeting Washington`s regional allies.
Brent crude and US West Texas Intermediate each gained more than 4%, with Brent continuing a volatile month that has seen prices swing from around $72 a barrel at the start of July to above $100 last week before easing during the brief pause in fighting.
The renewed tensions underscored the fragile state of diplomatic efforts despite US President Donald Trump`s recent comments that there was a "good chance" of reaching a deal.
Meanwhile, technology stocks remained under pressure as investors continued to reassess lofty expectations surrounding artificial intelligence.
The sell-off intensified after technology publication The Information reported that Chinese company Shanghai Yuliangsheng had begun mass production of chipmaking technology in a market long dominated by Dutch equipment maker ASML.
South Korea`s benchmark Kospi index dropped more than 6%, extending Tuesday`s sharp losses.
Chipmakers SK hynix and Samsung Electronics fell about 10% and 6%, respectively.
SK hynix also came under pressure after reporting quarterly operating profit and revenue below analysts` expectations, despite a more than twelvefold increase in net profit.
The company`s shares have fallen by more than half since reaching a record high a month ago.
A key supplier of high-bandwidth memory chips used in Nvidia`s AI processors, SK hynix has been one of the biggest beneficiaries of the AI boom.
"When you`re the dominant supplier of the high-bandwidth memory that powers Nvidia`s chips, the AI boom lands directly on your bottom line," said Josh Gilbert of eToro.
"That means the market is unlikely to focus on the headline numbers alone. The bigger question is whether margins and guidance can justify its recent performance."
Technology stocks also dragged down Japan`s Nikkei index, with Kioxia, Advantest and Tokyo Electron posting losses. Taiwan`s benchmark index fell nearly 3% as heavyweight chipmaker TSMC retreated.
Elsewhere in Asia, however, markets in Sydney, Singapore, Wellington, Manila and Jakarta posted gains, while Shanghai slipped modestly.
Investors are now awaiting earnings reports from Samsung, Kioxia and US technology giants Microsoft, Meta, Apple and Amazon later this week.
Attention is also focused on the Federal Reserve`s policy meeting, where policymakers are widely expected to keep interest rates unchanged.
However, analysts said uncertainty remains over whether the central bank could signal a more hawkish outlook.
Matt Weller of City Index said traders would be watching for stronger language on inflation risks or any indication that policymakers were considering tighter monetary policy.
He noted that multiple dissenting votes in favour of an immediate rate increase would represent a significant surprise and could strengthen the US dollar while weighing further on risk assets.
