South Korea’s Kospi tumbles over 4% as Asian stocks retreat

ASIAN stocks fell as South Korean chipmakers tumbled, while oil declined and Treasuries rose after US President Donald Trump said fresh US-Iran talks would begin on Monday (Aug 3) – boosting optimism that the two sides will reach a deal to reopen the Strait of Hormuz.

Brent for October slid as much as 7.3 per cent to US$81.55 a barrel after Trump said he would agree to call off a massive attack on Iran as allies in the Middle East, including Saudi Arabia, asked him to pursue a deal instead.

Oil was also weighed down by another small increase by major Opec+ nations to their production quotas. 

Treasuries rose across the curve as oil’s decline eased inflation concerns. The benchmark 10-year yield dropped four basis points to 4.7 per cent, after rising to the highest since January 2025 last week. Gold climbed as much as 0.9 per cent.

The yen strengthened for a fourth day, building on its intervention-led gains late last week.

Japan’s currency advanced as much as 1.4 per cent to 155.23 per US dollar with traders remaining on alert for further coordinated intervention. Bloomberg’s gauge of the US dollar fell, with the yen contributing the most to that move.

Monday’s market gyrations came after days of escalating tensions that saw the US threaten to hit the Islamic Republic “very hard” in a bid to end a conflict now in its sixth month.

A supply squeeze triggered by the war drove up fuel costs, stoking fears of another inflation spike and unsettling investors.

Focus is also returning to the artificial intelligence theme after a week of violent swings culminated in a sharp rebound for chip stocks after a rout in chip stocks earlier.

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“If we get something concrete on a peace deal, or more importantly the reopening of the strait of Hormuz, then we could see some strong relief rallies across the market,” said Nick Twidale, chief market analyst at AT Global Markets.

“For now it feels we will continue to see volatility across different markets, especially as AI trade remains the dominant theme for equities.”

A regional gauge of chip stocks fell 0.8 per cent as Samsung Electronics and SK Hynix both tumbled more than 8 per cent, offsetting gains in Japanese semiconductor companies such as Renesas Electronics and Kioxia.

On Friday, China’s DeepSeek rolled out a public beta application programming interface, or API, for its flagship AI model, V4 Flash, touting advancements in agentic abilities. 

South Korea’s Kospi Index, a bellwether for AI investments, fell more than 4 per cent, after surging a record 18 per cent on Friday.

Among other main market moves, the S&P 500 futures rose 0.5 per cent as at 10.52 am Tokyo time.

Nikkei 225 futures (OSE) fell 0.7 per cent, Japan’s Topix dropped 2.2 per cent, Australia’s S&P/ASX 200 declined 0.2 per cent, Hong Kong’s Hang Seng rose 0.6 per cent and the Shanghai Composite retreated 0.4 per cent.

With the Nikkei 225 Stock Average also slipping over 2 per cent, the broader MSCI gauge of Asian shares tumbled 0.9 per cent. 

Sentiment stabilised with futures contracts for the Nasdaq 100 Index rising 0.8 per cent.

Trump suggested a deal on reopening the Strait of Hormuz may be close, and said he would also continue to pursue a path to end Iran’s nuclear program.

Iranian Foreign Minister Abbas Araghchi said earlier on Sunday that negotiations between Iran and Oman are in the final stages.

The two countries that flank the strait are discussing a new route through it, but the talks do not cover whether the strait will be closed or open, Araghchi spokesman Esmail Baghaei said in an interview on Iranian state-run TV.

Markets remain on high alert for more joint intervention by Japan and the US on Monday after coordinated operations in Tokyo and New York last week triggered a dramatic rebound in the currency.

Japan’s Ministry of Finance said it conducted a yen-buying operation on Jul 31, US time, in coordination with the US Department of Treasury and would not hesitate conducting further joint intervention.

Trump told reporters on Sunday that the move was “a signal of friendship”.  

Treasury Secretary Scott Bessent said the US stepped in to help fight “disorderly” movements in the yen and is ready to keep helping Japan. 

“For a week probably, we can see more choppiness and probably more temporary yen strengthening,” said Julia Wang, North Asia chief investment officer at Nomura International.

“But we do think this does not change the actual direction for dollar-yen and probably will continue higher once the intervention is behind us.” BLOOMBERG