US futures, Asian shares slip, tracking Wall Street's retreat, while oil falls more than $2

NEW YORK (Financial Correspondent Desk) — A wave of risk aversion swept through global markets on Monday, as investors grappled with concerns over stretched technology valuations, shifting geopolitical landscapes, and uncertainty at the helm of the U.S. Federal Reserve. Asian stock markets saw a broad and deep retreat, U.S. equity futures signaled a weak open for Wall Street, and crude oil prices tumbled more than $2 a barrel on signs of easing tensions with Iran.

The sell-off was most pronounced in Asia’s high-flying technology sector, which has been the primary engine of market gains for weeks. The pullback suggests a growing unease among investors that the recent rally, fueled by a frenzy around artificial intelligence, may have outpaced fundamentals, prompting a significant round of profit-taking.

Asia Tech Stocks Lead Global Retreat

Monday's trading session in Asia was marked by steep declines across most major bourses, with technology and semiconductor-heavy markets bearing the brunt of the downdraft. The exception was Tokyo, which managed a marginal gain.

South Korea’s Kospi index was the region's worst performer, plunging 4.6% in a stark reversal of its recent record-setting run. The drop was led by the very names that had previously spearheaded its ascent.

• The AI Factor: After weeks of piggybacking on the global AI craze, South Korean tech giants faced a sharp reckoning. The sell-off reflects mounting anxiety that a speculative bubble has formed around AI-related stocks, whose valuations have soared on promises of future growth. Investors are now questioning the sustainability of this rally and locking in profits.

Tech bellwether Samsung Electronics, a cornerstone of the Kospi, tumbled 3.5%. The losses were even more severe for chip maker SK Hynix, which sank 5.6%. Both companies have been seen as major beneficiaries of the AI boom, particularly through their connections to industry leaders like Nvidia.

Other regional markets followed suit, tracking the negative sentiment and the weak lead from Wall Street on Friday.

• Regional Declines: Hong Kong’s Hang Seng index dropped 2.0%, while the Shanghai Composite index in mainland China fell 1.1%. In Australia, the S&P/ASX 200 lost 1.1%, and Taiwan’s Taiex, another market with heavy tech exposure, declined 2.1%.

In a notable divergence, Japan’s Nikkei 225 index edged 0.2% higher, bucking the regional trend. Analysts suggest this resilience may be tied to a weaker yen, which benefits Japan's export-oriented companies, or a different domestic market focus compared to its more tech-centric neighbors.

Oil Prices Ease on Diplomatic Overtures

The energy market experienced its own dramatic shift, with crude oil prices falling sharply after comments from U.S. President Donald Trump suggested a potential de-escalation of tensions with Iran.

U.S. benchmark crude (WTI) lost $2.80 to trade at $62.41 per barrel. Brent crude, the international standard, fell an even steeper $3.00 to $66.32 per barrel.

• Geopolitical De-escalation: Speaking to reporters, President Trump indicated that Iran is engaged in "serious" talks regarding its nuclear program. "I don’t know that they will. But they are talking to us. Seriously talking to us," he said. This rhetoric appeared to unwind a significant portion of the "geopolitical risk premium" that had been priced into oil.

Analysts noted that these comments assuaged immediate fears of a military conflict or other disruptions to oil supplies from the critical Middle East region. For weeks, rising tensions had supported higher prices on fears that sanctions or military action could choke off a significant portion of global supply.

In other commodities, precious metals markets showed signs of continued volatility. Gold fell 1%, while silver bucked the trend and gained more than 2%. The split movement comes after both metals plunged on Friday, halting record-breaking rallies and signaling uncertainty among safe-haven investors.

Fed Leadership Speculation Adds to Market Jitters

Adding another layer of uncertainty for investors is the future leadership of the U.S. Federal Reserve. Markets appeared jittery while digesting the implications of President Trump’s new nominee to lead the central bank, Kevin Warsh.

Warsh, a former Fed governor, is viewed by many as more hawkish on monetary policy than the current leadership, meaning he may be more inclined to raise interest rates to combat inflation. This stance stands in contrast to President Trump's repeated calls for lower interest rates to stimulate economic growth.

• The Fed's Global Influence: The head of the U.S. central bank wields immense power over the economy and global markets. The Fed's decisions on interest rates dictate the cost of borrowing for corporations and consumers, influencing the prices of nearly every asset class, from stocks and bonds to currencies and commodities. Warsh's nomination, which requires Senate approval, introduces a significant variable into the monetary policy outlook.

The prospect of a more aggressive, rate-hiking Fed unsettled a market that has grown accustomed to a more accommodative policy environment. Higher interest rates can slow economic growth and make stocks less attractive relative to safer assets like bonds.

Looking Ahead: A Week of Caution

The negative sentiment was reflected in U.S. futures markets, which pointed to a challenging start to the week on Wall Street. Futures for the S&P 500 sank 0.9%, while Dow Jones Industrial Average futures fell 0.5%.

This follows a downbeat session on Friday, when the S&P 500 and the Dow both lost 0.4%, and the tech-heavy Nasdaq Composite fell 0.9%.

Even on Friday, there were pockets of strength. Tesla shares rose 3.3%, rebounding from a post-earnings dip, and Apple added 0.5% after reporting better-than-expected profits. However, these individual success stories were not enough to counter the broader market malaise that has now carried over into the new week.

Investors are now positioned for a period of heightened caution. The key questions dominating the outlook are whether the tech sell-off is a temporary correction or the beginning of a more sustained downturn, how diplomatic efforts with Iran will evolve, and who will ultimately steer the Federal Reserve. The answers to these questions will likely set the market's tone for weeks to come.