Stacy Boit,

South Korea’s stock market was forced to halt trading for 20 minutes after the Kospi index plunged by nearly 9% within minutes of Monday’s opening.

The halt is part of a circuit breaker mechanism designed to prevent panic trading and was triggered for the third time this year after a sharp sell-off in technology stocks.

Japan’s Nikkei 225 index slid by around 4% – the most in three months – as shares of major tech companies fell.

Oil prices also rose on Monday, fuelling concerns of inflation, after Iran and Israel exchanged strikes for the first time since a ceasefire was agreed between the sides and the US in April.

Traders are nervously watching a “messy mix” of several shocks to the market mainly tied to the tech sector and accelerated by rising energy prices, said chief investment strategist Charu Chanana from Saxo.

Tech stocks have seen a strong run in recent weeks, but investors are “repositioning” over fears the investments into artificial intelligence may be overvalued, she said.

Markets like the Kospi and Nikkei are particularly exposed to such shocks given their exchanges are dominated by tech stocks.

Trading in South Korea has resumed since the circuit breaker was triggered, with the Kospi index down by about 5%.

The share prices of major South Korean tech companies were sharply lower, including those of chipmakers Samsung and SK Hynix.

South Korean President Lee Jae-myung said on Monday that the stock market is expected to experience volatility but he believes domestic shares are still “slightly undervalued”.

Overall, the tech-heavy Kospi has seen huge gains in recent months due to a wave of investment in the country’s tech companies.

Investors are more looking for clear signs that AI demand has translated into “real revenue”, Chanana said. “The burden of proof has gone up.”

Other Asian stock exchanges, like the Hang Seng Index and the Shanghai Composite were also down on Monday.

The losses follow a wave of sharp drops seen on Wall Street on Friday, where a sell-off in tech stocks saw shares on the Nasdaq lose around 4% – its biggest drop in over a year.

Part of the decline follows fears of a hike in interest rates, due to a lower-than-expected unemployment rate in April as well as persistently high inflation linked to the war in the Middle East.