Global Turmoil: Oil Surges on Iran Attack, South Korean Stocks Crash 8% as Tech Plummets Ahead of Fed Decision

The global financial landscape showed significant volatility today as U.S. stock futures edged lower. This downturn was largely triggered by a sharp spike in oil prices following a reported ballistic missile attack by Iran on American forces, which, while intercepted, heightened geopolitical anxieties. Concurrently, a severe rout in the semiconductor sector sent South Korea’s benchmark Kospi index tumbling by more than 8%, leading to a trading halt.

As trading commenced, S&P 500 futures saw a modest decline of 0.12%, while Nasdaq 100 futures, heavily weighted by technology, dropped a more substantial 0.49%. Dow Jones Industrial Average futures also shed approximately 0.1%, or 60 points.

Asian markets bore the brunt of the sell-off. South Korea's Kospi reversed early gains to plunge over 8%, dragged down by index heavyweights SK Hynix and Samsung Electronics. The small-cap Kosdaq mirrored this decline, falling over 8%. Japan's Nikkei 225 retreated by 2.2%, and the Topix lost 0.61%. In contrast, Hong Kong's Hang Seng Index managed to buck the trend with a 1.4% gain, while Mainland China's CSI 300 was down 0.73%.

The primary catalyst for the oil surge was the news from U.S. Central Command (CENTCOM) confirming that Islamic Revolutionary Guard Corps forces had launched multiple ballistic missiles in an attempted surprise attack on U.S. forces in the Middle East. Although these missiles were successfully intercepted, West Texas Intermediate crude futures advanced about 4% to trade around $82 a barrel, reflecting renewed supply concerns.

On the corporate earnings front, Ford Motor shares jumped 4% in extended trading after the automaker surpassed earnings expectations and raised its 2026 forecast. Conversely, Visa shares slipped roughly 1% after the payments giant provided underwhelming guidance for the period.

Investors are also keenly focused on the upcoming Federal Reserve's interest rate decision and the subsequent press conference with Chairman Kevin Warsh later today. CME's FedWatch tool indicates that fed funds futures traders are pricing in a nearly 70% likelihood that the central bank will keep rates steady at the current target range of 3.5% to 3.75%.

The market sentiment stands in stark contrast to Tuesday's performance, where the Dow surged over 500 points, marking its third consecutive winning day, partly fueled by a recent decline in oil prices. However, the Nasdaq Composite endured its fifth straight session in the red, primarily due to struggling chip stocks. The VanEck Semiconductor ETF (SMH) dropped 3.5% on Tuesday, accumulating a one-week loss exceeding 9%.

Julia Hermann, global market strategist at New York Life Investment Management, commented on the current climate, stating, "We continue to believe markets are placing too much weight on inflation risk and too little weight on the economic consequences of further tightening. A more hawkish communication stance would likely test today's narrow market leadership more than the broader market."

Before the Fed's announcement, investors will scrutinize earnings reports from Procter & Gamble and Humana, due before the market opens. Later in the afternoon, tech giants Microsoft and Meta Platforms, alongside chipmaker Qualcomm, are also scheduled to release their results.

European and Asian Markets: A Detailed Look

European stock markets are broadly expected to open lower, with Stoxx 50 futures down 0.04%, the U.K.'s FTSE 100 set to decline almost 0.1%, and Germany's DAX seen about 0.42% lower. The French CAC 40 was hovering just above flat, while the Italian FTSE MIB was off by almost 0.19%.

UBS Reports Strong Q2 Profits

Swiss banking giant UBS posted a net profit attributable to shareholders of $2.8 billion for the second quarter, aligning with analyst forecasts. Pre-tax profit surged 64% year-on-year to $3.6 billion. Despite a slight dip in its common equity tier 1 (CET1) capital ratio to 14.4%, CEO Sergio Ermotti emphasized the strong results and healthy capital generation. The bank announced plans for a $1 billion share buyback over the next three months, driven by robust performance in global wealth management ($36 billion net new assets), asset management ($6 billion net new money), and its investment banking unit (+31% year-on-year revenues).

Oil Volatility Continues Amidst Mideast Tensions

Oil prices saw significant upward movement in Asia trading following renewed U.S.-Iran hostilities. Brent crude futures for September delivery climbed 3.42% to $86.97 a barrel, while U.S. West Texas Intermediate futures advanced 3.58% to $82.09 per barrel. This escalation follows Iran's ballistic missile attack on U.S. forces and subsequent retaliatory strikes by U.S. and Saudi forces against "Iran-aligned terrorists" in eastern Iraq.

South Korea's Chip Sector in Freefall

For the second consecutive day, South Korea's stock exchange triggered a circuit breaker on the Kospi index as it plunged 8%. This trading halt, lasting 20 minutes, was fueled by a sharp sell-off in major chip manufacturers, with SK Hynix tanking nearly 13% and Samsung Electronics falling 8%.

Asian Tech Rout Extends

The sell-off in Asian technology stocks broadened today, with semiconductor companies leading the declines. SK Hynix slid more than 10% after missing analysts' second-quarter profit and revenue estimates, despite posting record figures. Samsung Electronics lost over 4%, LG Innotek fell 9%, and Seoul Semiconductor dropped over 6%. Japanese chip-related names also suffered, including Kioxia (-10%), Tokyo Electron (-8.5%), and SoftBank Group (-7%). Mainland China's tech-heavy ChiNext 300 index lost 1.83%, and the Hang Seng China Semiconductor Chips Index fell more than 5%. Taiwan's TSMC, the world's largest contract chip manufacturer, was 1.32% lower. Kieron Poon, investment director of Asian equities at Aberdeen Investments, noted that this volatility reflects "the ongoing deleveraging process in Korea and softer sentiment towards global technology stocks," though he maintains a "long-term positive view."

SK Hynix Q2 Performance

SK Hynix reported record second-quarter profit but fell short of LSEG SmartEstimates. Revenue reached 79.32 trillion won ($54.55 billion) against an expected 84 trillion won, and operating profit was 60.54 trillion won compared to an estimated 64 trillion won. Despite the miss, revenue surged 257% year-on-year and operating profit soared nearly 557% year-on-year, driven by sustained demand from expanding AI infrastructure investments and record price increases for high-performance AI server products.

Earlier Market Movements

Initially, Asia-Pacific stocks had opened higher on Wednesday. South Korea's Kospi jumped 1.95%, and the small-cap Kosdaq added 1.5%. Japan's Nikkei 225 gained 0.52%, with the Topix rising 0.37%. Australia's S&P/ASX 200 also advanced 0.83%. However, this early optimism quickly dissipated as geopolitical tensions mounted.

Prior to that, Asia-Pacific markets were bracing for a mixed open due to rising Mideast hostilities. Futures contracts indicated a lower open for Japan's Nikkei 225 and a mixed outlook for Hong Kong's Hang Seng and Australia's S&P/ASX 200.

Bank of America Downgrades Exxon

Bank of America downgraded Exxon to neutral, citing concerns about a potential fall in oil prices if a ceasefire between the U.S. and Iran is reached. Analysts also noted that 20% of Exxon's global production is affected by disruptions in the Strait of Hormuz, limiting its upside potential ahead of its second-quarter earnings report on Friday.

Nasdaq 100's Longest Losing Streak

On Tuesday, the Nasdaq 100 fell approximately 1%, marking its fifth consecutive day of losses – its longest daily losing streak since early January.

Earlier in the trading day, shortly after 6 p.m. ET on Tuesday, Dow and S&P 500 futures were trading near flat, while Nasdaq 100 futures had shown a modest gain of 0.2%.