Asian markets mostly declined on Friday as investor optimism around artificial intelligence stocks faded amid rising concerns over inflation, elevated oil prices and uncertainty surrounding the Iran war.Japan’s Nikkei 225 fell 1.2% to 61,880.04, while South Korea’s Kospi dropped 3.2% to 7,727.34 after briefly crossing the 8,000 mark for the first time.The sharp reversal came after weeks of strong gains fuelled by enthusiasm around AI-related shares.Hong Kong’s Hang Seng slipped 0.9% to 26,145.66, while China’s Shanghai Composite edged up 0.1% to 4,183.05.Australia’s S&P/ASX 200 also dipped 0.1%.MSCI’s broadest index of Asia-Pacific shares outside Japan fell 2.3%, putting it on track for a weekly decline.
Trump-Xi talks in focus
Investors remained focused on US President Donald Trump’s summit with Chinese President Xi Jinping in Beijing. Trump said China wanted to buy US oil and both sides agreed that the Strait of Hormuz should remain open. However, analysts urged caution over any headline agreements.“Strategic stability has improved somewhat, and tail risks have been mildly reduced,” Yue Su of EIU said, as quoted by Reuters, while adding that underlying tensions between Washington and Beijing remain unresolved.According to news agency AP, analysts at Capital Economics said agreements emerging from the summit should be viewed with “a healthy degree of scepticism”, noting that several projects announced during Trump’s 2017 China visit never materialised.
Oil prices and inflation fears pressure sentiment
Oil prices continued to rise amid stalled US-Iran talks and continued disruption in the Strait of Hormuz. Brent crude climbed above $107 per barrel, while US crude crossed $102. Brent prices were up 5.7% for the week.Attacks on a cargo ship near Oman and the seizure of another vessel near the UAE also added to concerns over global energy supplies. The Strait of Hormuz remains a major concern for markets as it is crucial for global oil and gas shipments.Rising treasury yields and growing expectations of a possible US Federal Reserve rate hike this year further hurt investor sentiment. The 30-year US treasury yield climbed above 5%, its highest level since 2025, while markets priced in a 45% chance of a Fed rate hike later this year.
Wall Street hits fresh record highs
Despite the cautious mood in Asia, Wall Street closed at fresh record highs overnight.The S&P 500 and Dow Jones Industrial Average rose strongly, while the Nasdaq also advanced.Technology stocks continued to attract investor interest, with Nvidia gaining 4.4% amid optimism over AI chip sales to China.Cisco Systems jumped more than 13% after reporting stronger-than-expected earnings and announcing smaller job cuts than previously anticipated.