Middle East Tensions Tighten, Oil Prices Surge to Six-Month High, Emerging Markets Hit by "Double Kill" of Stocks and Currencies

Bloomberg News reports that as tensions escalate in Iran, oil prices have risen to a six-month high, and market risk appetite has cooled, leading to a collective decline in Asian emerging market stocks and currencies.

The MSCI Asia Pacific Index fell as much as 0.8% during the day, while global emerging market stock indexes remained flat on Friday. The Hong Kong market resumed trading after the Lunar New Year holiday, while mainland Chinese markets remain closed. The emerging market currency index dipped slightly by 0.1%, with the US dollar strengthening.

According to reports, the U.S. military is significantly increasing its troop presence in the Middle East, including two aircraft carriers, fighter jets, and refueling aircraft; President Trump stated that Iran has at most 10 to 15 days to reach an agreement on its nuclear program. As a result, crude oil prices rose to their highest level since August last year.

Michael Wan, a senior foreign exchange analyst at Mitsubishi UFJ Bank, noted that the Philippine peso, Indian rupee, Korean won, and Thai baht are usually more sensitive to oil price surges. However, he also wrote that given the fundamentals of the crude oil market still show a significant oversupply, the weak trend of Asian currencies such as the won, New Taiwan dollar, and ringgit may gradually diminish in the medium to long term.

Contrasting the overall market weakness, the Korean stock market hit a new high, solidifying its position as the best-performing stock market globally this year. Despite continuous foreign selling, the Kospi index remains supported by retail investor buying and optimistic sentiment around artificial intelligence.

In Hong Kong, there is a trend of funds shifting from traditional internet giants to pure artificial intelligence concept stocks.