Asian emerging market shares hit a more than two-month low on Tuesday as oil prices jumped after the U.S. reimposed its naval blockade on Iran, while South Korean shares hit an 11-week low.
The MSCI EM Asia gauge fell as much as 2.5% to its lowest point since May 4 as the U.S. military carried out a third consecutive night of strikes against Iran, and President Donald Trump proposed charging a 20% fee to guard the vital Strait of Hormuz.
Oil prices climbed nearly 3% to a one-month high, and are now at their highest level since the two countries signed a memorandum of understanding to end the war on June 17.
"The reversion to the old Middle East status quo may take time to restore and will likely remain a focus for investors, that said the peak of volatility surrounding the conflict is likely behind us," Ecaterina Bigos, chief investment officer, Asia ex-Japan, at BNP Paribas Asset Management said.
South Korea's benchmark KOSPI index , currently up 0.6%, had tumbled as much as 5.3% to its lowest since late April, dragged down by SK Hynix, the world's leading AI memory chipmaker, which fell as much as 9% to a near 8-week low.
The tech-heavy KOSPI, which ended the previous session nearly 9% lower, still remains one of the best-performing indices in the region, up nearly 56% so far this year.
Stocks in Taiwan plunged as much as 3.8% to a more than one-month low, as TSMC shares fell 2.1% to its lowest in two weeks.
In Jakarta, stocks advanced slightly to notch a three-week high, while the rupiah strengthened to 18,085 per U.S. dollar.
The country's central bank will continue its efforts to stabilise its currency, its deputy governor said on Monday, after S&P affirmed the country's sovereign credit ratings, saying the fiscal strains could be temporary.
Among other regional stocks, equities in Thailand and Singapore fell over 1% and 0.1%, respectively. Malaysian stocks rose as much as 0.7% to a three-week high.
Preliminary data released earlier showed Singapore's economy grew by 5.7% in the second quarter, as strong AI-related chip demand offset the impact of the Iran war on some industrial sectors.
Regional currencies were largely mixed: the South Korean won appreciated to a nine-week high of 1,486.30 per dollar.
Malaysia's ringgit fell as much as 0.3% to 4.080 a dollar, while currencies in Singapore and Taiwan were muted.
The Philippine peso weakened to a five-week low of 61.689.
HIGHLIGHTS:
** South Korea central bank to raise rates for first time in over three years on July 16 - Reuters Poll
** South Korea forecasts 2026 economic growth at 5-year high on AI chip boom
** Singapore's Q2 GDP rises 5.7% y/y, driven by AI-related demand, preliminary data shows - Reuters
