MSCI’s broadest index of Asia-Pacific shares outside Japan dropped 1%

Asian stocks turned lower on Thursday after a ​tentative early rise on latest Middle East escalation ‌that drove oil higher.

MSCI’s broadest index of Asia-Pacific shares outside Japan dropped 1%, with Taiwanese shares slipping 1.5% and the Nikkei 225 down by the same magnitude. S&P 500 e-mini futures rallied from modest declines to trade up 0.2%.

Iran announced the closure of the Strait of Hormuz in ​response to U.S. attacks. Brent crude gained 1.6% to $94.55 a barrel in Asian trading.

Strategists believe that Asian stocks that had rallied hardest during the ⁠past two months are likely to extend recent losses, as markets question whether the sky-high expectations for earnings growth that had driven the gains ​can be maintained.

Given already stretched valuations, these extreme bullish expectations set a vulnerable backdrop for momentum in Korea, Taiwan and the Asia tech sector, said ​Rupal Agarwal, Asia quant strategist at Bernstein in Singapore, in a note to clients.

Trimming positions in these stocks would be most prudent, she added, noting that the re-escalation on the war front could further accelerate this unwind.

Some AI-linked stocks steadied as markets searched for a floor after five declines in the past six sessions. KOSPI swung ​between gains and losses, trading down 1.2% after earlier declining as much as 4.4%

Oracle shares shed 8.9% in extended trading after it forecast capital spending ​plans for fiscal 2027 above Wall Street estimates. The company also said it would raise around $40 billion through a combination of debt and equity financing next year, amid ‌intense ⁠investor scrutiny over the rising debt load it is taking on to fund its AI infrastructure buildout.