Asian share markets were cautious on July 20 amid escalating conflict in the Middle East that pushed Brent crude oil above $90 a barrel for the first time in over a month, reviving inflation fears and increasing bets on U.S. interest rate hikes as early as September 2026 [1, 2, 3]. The U.S. military had launched nine consecutive days of strikes against Iran, prompting counterattacks by Iran-backed Houthi forces and raising tensions in the region [1, 2, 4]. Brent crude rose about 3% on the day amid the ongoing strikes and reciprocal attacks [1, 2, 3].
Higher oil prices fueled concerns over inflation, with around a 60% chance of a Federal Reserve rate hike priced in for September, reflecting shifting risks toward an earlier move than previously expected. "Our forecast is for a more gradual turn toward a Fed hike in 2027, but the balance of risks is shifting in the direction of an earlier hike than expected," said Bruce Kasman, Chief Economist at JPMorgan [1, 5]. The surge in oil added pressure on a tech sector already rattled by market volatility and valuation worries.
The Philadelphia Semiconductor Index dropped 10% in the week ending July 19 as investors grew cautious about high valuations in AI and chip stocks [1, 3]. South Korean shares slid roughly 5.1% on July 20, extending a bear market with the Kospi down over 22% for the month amid an unwind of AI-related trades, according to Kelvin Lam, Senior China Economist at Pantheon Macroeconomics, who said Korea’s chip producers are sensitive to shifts in market sentiment [6]. Vishnu Varathan of Mizuho Bank noted renewed worries about a "race to the bottom on model compute undercutting staggering investments by hyperscalers" [6].
Chinese AI firm Moonshot announced its new open-weight Kimi K3 model on July 17, claiming it rivals U.S. firm Anthropic's frontier Fable model. This announcement added to the pressure on tech stocks ahead of big earnings reports [1, 6]. Major U.S. tech companies including Alphabet, Intel, Tesla, Microsoft, Meta, Apple, and Amazon are set to report earnings in the coming week, with expectations that tech will contribute more than half of estimated 28% earnings growth. Stephen Innes of SPI Asset Management said that big tech now must "prove that AI revenues, margins and cash flow can justify the scale of the huge investments in AI infrastructure" [4].
On July 21, emerging Asian shares rebounded nearly 3% as oil prices eased slightly and hopes rose for a 10-day ceasefire proposal between the U.S. and Iran. South Korean and Taiwanese stocks led the gains, with Samsung Electronics shares up 7.8% and SK Hynix rising 6.5% [7, 4]. Gold prices meanwhile fell to a two-week low near $4,000 per ounce on July 20 amid rising oil and Fed hike expectations but recovered to about $4,042 on July 21 on hopes for diplomacy, according to Ilya Spivak of Tastylive [2, 5].
The Houthis also announced a naval blockade threat to Saudi ports despite ongoing U.S.-Iran mediation efforts. Michael Wan of MUFG said disruption risks were unlikely to be sustained given the Houthis’ current capabilities and challenges in distinguishing ship ownership [5, 4]. The Indonesian rupiah weakened to roughly 17,991 per U.S. dollar on July 20 before firming slightly; Bank Indonesia is expected to raise rates to help stabilize the currency [6, 7].
Markets will watch closely as the key U.S. tech earnings season unfolds this week against the backdrop of geopolitical tensions and inflation concerns.
