Major Asian stock markets fell sharply on Monday, August 5, as renewed tensions between Iran and Israel combined with concerns that the US Federal Reserve may raise interest rates.
South Korea's market took the heaviest hit in a broad sell-off. The KOSPI index dropped nearly 9% in morning trading, triggering the exchange's circuit breaker for the second time this year. The Korea Exchange had previously activated this mechanism on March 4, when the index recorded a record 12.06% decline. After resuming trading, the KOSPI closed down 8.29%.
AI-related tech stocks were sold off heavily, led by chip giants Samsung Electronics and SK Hynix, which fell 10.2% and 7.6% respectively. These are South Korea's two largest companies by market capitalization.
In Japan, the Nikkei 225 fell 3.9%. Shanghai's SSE Composite and Hong Kong's Hang Seng dropped 1.7% and 1.3% respectively. Taiwan's TAIEX, dominated by the world's largest contract chipmaker TSMC, fell 3.5%.
Brent crude, the international benchmark, rose 3.7% to above $88.50 per barrel.
The equity sell-off unfolded as Iran and Israel clashed for the first time since April. Additionally, stronger-than-expected US jobs data last week fueled concerns that the Fed might raise rates.
All three major Wall Street indices fell on Friday, with the Nasdaq Composite dropping 4.18%, its biggest decline since April 2025.
Fabien Yip, market analyst at IG Group, commented: “The sharp decline stemmed from the major correction in US tech stocks on Friday, after the explosive non-farm payrolls data. AI optimism is fading, particularly affecting Asian tech firms that had rallied strongly in the past two months. The weak won and the possibility of policy tightening in South Korea could add further pressure to leveraged positions in this market.”
