Asia stocks sink as Iran fears weigh; Japan leads losses after BOJ comments

Asian stocks fell on Monday as markets remained largely on edge over an escalation in the U.S.-Israel war on Iran, with Japanese shares leading losses after the Bank of Japan suggested that interest rates could rise in the coming months.

Regional markets took a weak lead-in from Wall Street’s Friday session, with losses in technology stocks also spilling over amid profit-taking and concerns over artificial intelligence.

S&P 500 Futures fell slightly by 23:43 ET (03:43 GMT), with markets taking some relief after President Donald Trump said talks with Iran were going well.

Japan leads losses with BOJ rate hikes in focus 

Japan’s Nikkei 225 and TOPIX indexes were the worst performers in Asia, losing over 3% each.

Outsized losses in Japanese markets came after BOJ Governor Kazuo Ueda told parliament that the central bank was closely watching moves in the yen, and suggested that rising import costs due to a weak currency could invite more interest rate hikes.

Ueda said the bank will “guide policy appropriately” by scrutinizing currency moves and their impact on the economy.

While the BOJ governor did not directly signal any future rate hikes, his comments come after several prior instances of BOJ officials signaling that rates will rise as inflation and growth pick up.

Asian tech stocks fell across the board on Monday, tracking recent losses in their U.S. peers in a mix of profit-taking and concerns over the impact of AI.

The tech-heavy KOSPI and Hang Seng indexes fell about 3% and 1%, respectively, while losses in tech also weighed on the Nikkei.

South Korean memory chip makers Samsung Electronics Co Ltd (KS:005930) and SK Hynix Inc (KS:000660) slid 2.5% and 4.8%, respectively, extending deep losses from last week as Google’s unveiling of a new compression algorithm sparked uncertainty over long-term AI demand for memory.

Losses in the two spilled over into broader chipmaking stocks, while investors also locked in profits in tech stocks after AI-linked optimism drove years of strong gains.

Beyond tech, Asian stocks continued to be bogged down by uncertainty over the Iran war. Trump said talks were ongoing and that a deal could be close, but offered no clear cues.

Hostilities in the Middle East entered a new front over the weekend after the Yemen-based, Iran-backed Houthi group attacked Israel. The Houthi’s involvement could open up a new front in the war.

Oil continued to push higher on Monday, driving concerns over energy-driven inflation and economic disruption.

Among Asian markets, China’s Shanghai Shenzhen CSI 300 and Shanghai Composite indexes moved in a tight range. Australia’s ASX 200 fell 0.8%, while Singapore’s Straits Times was flat.

India’s Nifty 50 index fell 0.8% in morning trade.