Quick overview

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The war in Iran is hitting emerging Asian stocks hard, with about $7.9 billion withdrawn from Taiwan alone.

Global outflows from emerging Asian equities have accelerated to their highest level in four years amid the war in the Middle East. In just the past week, investors have pulled roughly $11 billion from the region’s stock markets.

The global reassessment of market risk triggered by the conflict has led to a broad selloff, particularly in Taiwan ($7.9 billion), South Korea ($1.6 billion) and India ($1.3 billion). On Wednesday, South Korea’s KOSPI suffered its worst daily drop on record, plunging 12.06%.

Meanwhile, the MSCI Asia-Pacific Index has fallen more than 6% so far this week, marking its largest decline in nearly six years and its worst performance relative to the S&P 500 since April 2025.

The outflows represent a reversal of a recent trend in which investors had been rotating out of what they saw as “expensive” U.S. assets and into cheaper Asian markets. That shift had been driven by a weaker dollar and strong bets on companies tied to the development of artificial intelligence.

Dependence on Middle Eastern oil

Asian giants China and India are among the world’s largest oil importers. Oil prices have surged more than 35% over the past month due to the conflict in the Middle East.

This exposure to crude from the world’s main oil-producing region is another factor weighing on Asian assets. The situation has been compounded by the blockade of the Strait of Hormuz, through which a large share of Middle Eastern oil exports passes.

The spike in oil prices has also raised expectations of broader inflationary pressures across Asia at a time when many central banks had anticipated a slowdown in inflation, prompting investors to adopt a more cautious stance.