ASX 200 Edges Higher as Oil Spikes on Iran War Escalation and Chinese AI Model Sparks Chip Stock Rout

SYDNEY — Australia's benchmark S&P/ASX 200 index clawed out modest gains Monday, rising as much as 0.45% in early trade before paring back to a 0.13% advance by mid-morning, as investors weighed surging oil prices tied to the escalating war between the United States and Iran against a deepening global selloff in semiconductor stocks.

The index sat at 8,797.7 points shortly after noon Sydney time, up slightly on the day after finishing the prior week 0.5% lower at 8,796.7. Futures had pointed to a stronger open, with ASX 200 futures up 54 points, or 0.61%, ahead of the session, but several sectors including materials, industrials, consumer staples, consumer discretionary and healthcare that opened higher had slipped back into negative territory by mid-morning.

Oil surges as Middle East conflict widens

Energy was the standout sector Monday, with Brent crude trading 3.1% higher at $91.07 a barrel, its highest level since June 11 and a 27.8% rally since hitting a low on July 1. The gains came as the war between the United States and Iran entered its sixth month with no sign of resolution. Three U.S. service members have died in the conflict, including two killed in an Iranian missile and drone attack in Jordan and a third during the controlled detonation of a downed Iranian drone in northern Iraq, marking the first American fatalities from Iranian fire since March.

U.S. forces have carried out eight consecutive nights of strikes on Iranian air defenses, coastal installations, and missile and drone storage sites, while Iran has widened its retaliation to strike U.S. allies in the Gulf, hitting a power and desalination plant in Kuwait for a second consecutive day. Shipping traffic through the Strait of Hormuz has collapsed to a fraction of pre-war levels, with just three commodity vessels transiting the waterway on Thursday compared with a daily average of about 125 before the conflict began, as a U.S. naval blockade on Iran-linked shipping remains in force.

The energy-driven rally lifted Australian fuel and gas producers. Viva Energy Group climbed 4.7%, Deep Yellow rose 4.07%, Karoon Energy gained 4%, Woodside Energy Group added 2.71% and Ampol rose 2.64%. Sims, the scrap metals recycler, also featured among the day's top performers, up 3.04%.

Chip selloff weighs on sentiment

Offsetting the energy gains was a deepening rout in technology and semiconductor shares that has rattled markets across Asia and the United States over the past week. The selloff intensified after Chinese startup Moonshot released an open-weight artificial intelligence model, Kimi K3, that the company says outperforms most rivals on overall capability, trailing only Anthropic's Claude Fable 5 and OpenAI's GPT-5.6 by some measures. The 2.8 trillion-parameter model, which Moonshot priced at roughly the level of Anthropic's Sonnet tier, reignited investor concerns about the sustainability of heavy AI infrastructure spending and the durability of pricing power among leading U.S. and Chinese AI developers.

The Philadelphia Semiconductor Index fell into bear-market territory last week, sliding roughly 10% over five sessions in its worst weekly performance in more than a year and ending Friday down just over 20% from its late-June record, though the index remains up more than 60% for the year to date. The rout spread across Asia, where Taiwan Semiconductor Manufacturing Co. shares fell 7.3% in Taipei even after the company lifted its 2026 capital expenditure guidance to between $60 billion and $64 billion. Taiwan's benchmark Taiex index dropped 6.5%, extending its decline from a June high to nearly 11%, as foreign investors sold a record $5.8 billion of shares on a net basis. A Bloomberg gauge of Asian chip stocks fell more than 6%, led by memory chipmaker Kioxia, whose shares have roughly halved in recent weeks.

The technology weakness followed a losing week on Wall Street, where the S&P 500 fell 1.01% to 7,457.69 on Friday, the Nasdaq dropped 1.4% and the Dow Jones Industrial Average slid 0.77%, capping weekly declines of 1.6%, 2.9% and 0.9%, respectively. Streaming giant Netflix tumbled 7.2% after issuing soft third-quarter revenue guidance, while International Business Machines Corp. posted its worst week on record following disappointing sales.

On the ASX, technology-exposed and gold names bore the brunt of the pullback. Gold miners fell broadly as the surging U.S. dollar and rising oil prices weighed on the sector, with Regis Resources down 2.84%, Evolution Mining off 2.47% and Genesis Minerals down 1.8%. Alcoa Corp. shares slid 4.61% and Flight Centre, the travel agency, dropped 4.43% as higher oil prices raised concerns about airline fuel costs. Qantas Airways fell 1.37%.

Trade and commodity dynamics in focus

Away from the broader market swings, South Korean steelmaker Posco, one of the largest private buyers of Australian exports, called for an overhaul of how the coking coal market sets benchmark prices, arguing that a narrow set of spot trades distorts the indices used across the industry. Posco's head of raw materials procurement said reliance on limited transaction data represented a structural vulnerability, echoing similar pressure major miners have faced in the iron ore market from Chinese buyers.

In company news, diversified miner South32 said it exceeded full-year production guidance across its portfolio and lifted fourth-quarter sales volumes 15% as it advances a US$5.6 billion sale of its aluminium business to Alcoa, a deal expected to leave roughly 85% of the company's pro-forma earnings coming from base and precious metals. Elsewhere, MGX Resources struck a binding deal to sell its Koolan Island iron ore operation to infrastructure investor Crestlink, and gold miner Aurelia Metals reported its strongest quarterly cash flow since 2018 alongside the planned departure of chief executive Bryan Quinn later this month.

Also weighing on investor sentiment was a report that U.S. corporate insiders sold $77.6 billion of stock in the first half of 2026, the second-fastest pace of insider selling in more than two decades and up 20% from a year earlier, a trend some market participants view as a caution signal given elevated valuations. Separately, shares of SpaceX have fallen 18.5% over the past six trading sessions and now sit below their initial public offering price, denting enthusiasm ahead of a wave of anticipated technology listings later this year.

Trading is expected to remain volatile through the session as investors continue to balance the geopolitical risk premium building into oil markets against the unwinding of momentum trades in the technology sector that has defined much of the past week's global market action.