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Introduction: Markets Hit by Iran Tensions and Tech Pullback

Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.

Stock markets across Asia-Pacific nations are retreating today, as investors worry about potential US rate hikes, fresh conflict in the Middle East, and the possible end of the AI boom.

Major indices are all lower; South Korea's KOSPI index dropped almost 9% at one stage, prompting a brief trading halt, while Japan's Nikkei 225 index is down 3.8%.

The retreat followed a tough Friday on Wall Street, where the S&P 500 fell by 2.64%.

Friday's decline was sparked by a stronger-than-expected US jobs report, leading many traders to expect the next US rate move to be upward rather than downward.

Technology stocks have also taken hits in recent sessions, amid concerns that the AI competition is becoming a contest over fundraising and spending, as ChatGPT and Anthropic gear up for stock market listings.

Combined with renewed Middle East conflict today, this creates conditions for further global market losses...

Kyle Rodda, senior financial market analyst at Capital.com, explains:

Things could get a bit more tense today in the markets after a flare-up in geopolitical tensions over the weekend.
Iran launched strikes on Israel for its attacks on Hezbollah targets in Beirut, leaving a nervous wait for the Israeli response. There is the heightened risk the war escalates again as peace talks between the US and a clearly emboldened Iran stall.

The agenda

7am BST: German factory orders
4pm BST: US inflation expectations

Key events

30m agoWhy AI stocks are selling off
46m agoTate and Lyle agrees to be taken over
53m agoNvidia's Huang draws crowd at chicken restaurant
1h agoEuropean tech firms' shares slide
1h agoFTSE 100 joins sell-off
2h agoUK companies opting to hire temporary workers over permanent staff
2h agoBoE's Taylor doesn't see need for higher interest rates
2h agoCircuit breakers triggered as South Korea's market tumbles
2h agoOil jumps 4.8% after Middle East attacks
2h agoIntroduction: Markets hit by Iran crisis and tech sell-off

My colleagues Dan Milmo, Aisha Down and Ana Lucia Gonzalez Paz have looked into the AI boom here:

Here are some charts from their report:

Europe's Stoxx 600 share index has dropped to a two-week low this morning, weighed by escalating tensions in the Middle East and a global selloff in AI stocks

Why AI stocks are selling off

Several factors came together to trigger the stock market sell-off which began on Friday, and is continuing today, says Charu Chanana, chief investment strategist at Saxo.

Chanana explains that while Friday's strong US jobs report was the trigger, the deeper issue was crowded positioning in the market for shares in AI and semiconductor companies.

Chanana cites five reasons why shares in the AI sector are falling:

AI crowding: Semiconductors and AI-linked names had become the default long trade. When everyone owns the same winners, even a small disappointment can lead to a much bigger unwind.
Top-heavy leadership: A small group of AI winners had been doing a lot of the heavy lifting for the broader index. That can make the market look stronger on the way up, but more fragile on the way down.
Expectations were too high: The reaction to Broadcom showed that good is no longer enough for AI-linked names. Investors want upside surprises, stronger guidance, clear monetisation and proof that AI demand is still accelerating. Anything short of that can become an excuse to take profits.
AI funding questions: AI is not just a growth story; it is also a very capital-intensive one. Alphabet's funding moves, and now Meta's, are reminders that the next leg of AI infrastructure needs serious money. Investors are becoming more focused on who funds that buildout, whether capex remains disciplined, whether dilution risk rises, and whether returns can justify the spending.
Geopolitical risk added pressure: Rising Middle East risks, oil volatility and fading peace hopes were not the main reason AI sold off, but they added another layer of uncertainty. When markets are already stretched, bad news travels faster.

Tate and Lyle agrees to be taken over

Ingredients developer Tate and Lyle has become the latest UK company to fall to an overseas takeover.

Tate and Lyle has agreed to be bought by US rival Ingredion in a 2.7bn pound deal, sending its shares up 12% this morning.

Once famous for sugar refining, Tate and Lyle now makes sweeteners, fibres and stabilisers for food producers to include in their products.

Victoria Scholar, head of Investment at interactive investor, says:

This is a very attractive offer for Tate and Lyle at 595p a share plus 20p a share in dividends, equivalent to a 64% premium prior to its recent surge. The announcement comes at a time when the UK business has been struggling with a weak share price performance and disappointing financial results, leaving the company vulnerable to a takeover.
There are clear synergistic benefits to the deal, with both companies focused on growth in the sugar substitute space. For Ingredion, the acquisition will help boost its presence in Europe too.
Sugar is very much out of fashion. Rising awareness of its negative impact on health combined with the growth in weight loss jabs has shifting consumer preferences towards healthier alternative products instead.
Shares in Ingredion are down 6% over the last month and 9% so far this year.

Nvidia's Huang draws crowd at chicken restaurant

The sell-off in AI stocks last night did not dampen the mood at Kkanbu Chicken restaurant in Seoul last night, where Nvidia CEO Jensen Huang met with senior executives from SK Group.

Huang and SK chairman Chey Tae-Won drank beer, ate fried chicken, and even handed out food to a large crowd who gathered at the scene.

The pair were in a convivial mood, as they celebrated a tie-up between the two companies to advance the development, design and manufacturing of next-generation memory for AI factories.

European tech firms' shares slide

Shares in European companies at the heart of the AI boom are falling sharply at the start of trading.

Chip firms such as Besi - BE Semiconductor Industries (-4.5%) and ASML (-3.2%) which makes chipmaking machines are among the big fallers on the pan-European Stoxx 600 index, which is down almost 0.9%.

German tech firm Aixtron has dropped almost 6%, while Finland's telecoms firm Nokia has dropped 5%.

This follows the heavy losses among tech firms in South Korea overnight (see earlier post).

Government bond prices are falling in early trading, pushing up borrowing costs for the US, the UK and eurozone countries.

The yield, or interest rate, on UK 10-year bonds has risen by 3.5 basis points (0.035 of a percentage point) to 4.93%. Shorter-dated bond yields (which rise when bond prices fall) are also up.

FTSE 100 joins sell-off

London's stock market has dropped at the start of trading, as the missile attacks between Israel and Iran worries the City.

The FTSE 100 index of blue-chip shares has fallen by 42 points, or 0.4%, to 10,326 points at the start of trading.

Jet-engine maker Rolls-Royce is the top faller, down 4.3%, after the company was criticised by the head of United Airlines over a delayed order for Airbus planes.

British Airways parent company, IAG, are down 2.6%.

Oil producers are rallying, though, with BP and Shell both up 1.5%.

UK companies opting to hire temporary workers over permanent staff

Britain's jobs market cooled rapidly in May after employers cut back on hiring permanent staff, a survey this morning shows.

The monthly Report on Jobs from accountants KPMG and the Recruitment and Employment Confederation, a trade body, showed permanent job placements fell at the fastest pace since July 2025.

German factory orders fell more than expected in April, in a sign that Europe's largest economy could be faltering as the Iran war drives up costs and weakens demand.

Manufacturing orders fell by 3.8% during April, statistics body Destatis reported this morning.

Orders in the automotive industry fell by 5.3%, while electrical equipment orders slumped by 16.3%.

BoE's Taylor doesn't see need for higher interest rates

One of the Bank of England's more dovish policymakers has suggested there's no need to raise UK interest rates to tackle the inflationary impact of the Iran war

Alan Taylor told Sky News - on a trip to the West Midlands - that interest rates are restrictive for the economy at their current level (3.75%), explaining:

I think interest rates don't need to go higher as they're quite restrictive at the moment.
I feel comfortable where we are unless we get the worst-case scenario. But I really want to get that sense that this is moving behind us.

Under the BoE's worst-case scenario, energy prices surge sharply and remain high, leading to a jump in prices and wage.

Taylor visited the construction site for HS2's Birmingham Curzon Street station, where he learned that supply chain pressures are filtering into the project, affecting steel, copper, concrete and other raw materials.

He told Sky:

It's a very volatile world right now.

The markets are being hit by a collision of technology, macroeconomic and geopolitical factors, says Kathleen Brooks, research director at XTB:

As we start a new week, the market is digesting a large upside surprise in US payrolls, tech stock jitters, a huge week for macroeconomic data and an increasingly fragile ceasefire in the US, after Iran and Israel both attacked each other, which could end the truce which has been in place since April. Oil prices have jumped 4% and Brent crude is back above $97 per barrel.

Circuit breakers triggered as South Korea's market tumbles

Major chipmakers led the slump on South Korea's stock market today.

Samsung Electronics are down 9.2%, and SK Hynix has dropped by 6.4%, helping to pull the KOSPI index down by over 8%. That slump tripping circuit breakers on the Seoul stock market.

Reuters has the details:

Circuit breakers were activated at 0003 GMT, halting trading for 20 minutes for the first time in three months. It was the third time they were triggered this year, and the ninth in history.

The KOSPI had surged through most of 2026, as the AI boom pushed up the value of South Korea's chipmakers.

Oil jumps 4.8% after Middle East attacks

The oil price is climbing back towards the $100 a barrel milestone, after new missile strikes in the Middle East today.

Brent crude, the international benchmark, has jumped by 4.8% to $97.60 a barrel, after Iran launched missiles at Israel on Sunday in response to Israeli strikes on Beirut's southern suburbs.

With the fragile ceasefire in the Middle East shattering, hopes that the strait of Hormuz could be reopened, allowing energy flows from the region to resume, are being dashed.

Introduction: Markets Hit by Iran Crisis and Tech Sell-off

Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.

Stock markets across Asia-Pacific countries are in retreat today, as investors fear a rise in US interest rates, renewed conflict in the Middle East, and an end to the AI boom.

Major bourses are all in the red; South Korea's KOSPI index fell by almost 9% at one point, forcing trading to be briefly suspended, while Japan's Nikkei 225 index is 3.8% lower.

The sell-off followed a painful Friday on Wall Street, where the S&P 500 fell by 2.64%.

Friday's drop was triggered by a surprisingly strong US employment report, which left many traders concluding that the next move in US interest rates will be up, not down.

Technology stocks have also been pummelled in recent days, on fears that the AI race is turning into a battle over who can raise, and spend, the most money, as ChatGPT and Anthropic prepare to float on the stock market.

Add in renewed conflict in the Middle East today, and it's a recipe for more losses across global markets...

Kyle Rodda, senior financial market analyst at Capital.com, explains: