Asian Markets Reel as AI Optimism Fades and Yields Spike

South Korea’s KOSPI index attempted a 4% rebound on Thursday, yet the recovery remains fragile after a massive selloff wiped more than $2 trillion from the nation's equity market. Regulators are now intervening to address volatility linked to leveraged ETFs, as investors re-evaluate their exposure to the semiconductor sector. The turbulence underscores a broader anxiety regarding the sustainability of the AI trade that has dominated investor sentiment for months.

Simultaneously, the Federal Reserve’s decision to hold rates steady has pushed U.S. Treasury yields to 19-year highs, tightening financial conditions globally. This shift has forced the dollar into a defensive posture while pressuring emerging markets. Energy markets are also reacting to the uncertainty; Brent crude futures retreated below the $90 threshold, cooling from a 7% spike triggered by regional tensions in the Middle East, despite the continued flow of oil through major shipping lanes.