The situation in the Middle East is forcing investors to reassess the most profitable stock strategies of this year. Some investors believe that the once-popular &#34;sell America, buy Asia&#34; trade is facing a critical turning point.
The MSCI Asia-Pacific Index has fallen 6% this week, while the S&amp;P 500 Index has only slightly declined by 0.1% during the same period, as global funds accelerate their return from Asia to the U.S. for safety. The U.S. dollar has strengthened simultaneously, further confirming this reversal in capital flow.
The core reason for the pressure on Asian markets is its heavy reliance on oil supplies from the Strait of Hormuz, with concerns that ongoing supply disruptions could drag down the global economic slowdown. Against this backdrop, investors are concentrating on cashing in on the gains driven by AI themes, with the South Korean market, which has performed well over the past year, facing significant selling pressure.
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Despite a technical rebound in the Asia-Pacific markets on Thursday, macroeconomic pressures have not eased. Brent crude oil has risen for the fifth consecutive day, and upward pressure on oil prices remains, with no substantial change in the underlying market logic.
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<h2>Oil Dependence Becomes Asia's Biggest Weakness</h2>
Asia's structural dependence on Middle Eastern oil has become the most vulnerable link in this round of supply shocks. Bloomberg Economics shows that China, India, and Indonesia are among the world's largest oil importers. Goldman Sachs estimates that if Brent oil prices rise by 20%, it will drag down Asian corporate profits by about 2%.
Alicia Garcia-Herrero, Chief Economist for Asia-Pacific at Natixis SA, pointed out that the pressure on Japan and South Korea is particularly pronounced, as over 60% of their oil imports must pass through the Strait of Hormuz. She further analyzed that the impact of this round of shocks has exceeded energy costs themselves and is spreading to sectors such as transportation, construction, finance, and defense.
Ajay Rajadhyaksha, Head of Research at Barclays, stated in an interview with Bloomberg TV:
<blockquote>
&#34;The Strait of Hormuz is the lifeline of global energy, but the U.S. has limited direct dependence on Middle Eastern oil. This issue is important for Europe, but it has the most far-reaching impact on Asian economies like South Korea and Japan that rely on imports.&#34;
</blockquote>
<h2>Strong Dollar Compresses Policy Space for Asian Central Banks</h2>
The inflation concerns triggered by rising oil prices are transforming the existing resilience of Asian stock markets into vulnerability. The strengthening U.S. dollar further suppresses local currency exchange rates, limiting the space for central bank easing and dragging down corporate profit expectations.
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Data compiled by Bloomberg shows that market expectations for cumulative interest rate hikes by the Bank of Korea over the next 12 months have been significantly raised from about 25 basis points to around 50 basis points. Rajeev de Mello, Global Macro Investment Manager at Gama Asset Management, stated:
<blockquote>
&#34;The narrowing of monetary easing space will hit stock market sentiment, as emerging market investors have been overly optimistic, and this sentiment is fading.&#34;
</blockquote>
Both Amundi Investment Institute and DWS pointed out that the United States has significantly stronger resilience to oil price shocks compared to Eurasia, as it is a net energy exporter, and safe-haven funds continue to flow in. Hebe Chen, a senior market analyst at Vantage Global Prime, emphasized that countries in Asia, such as Japan and South Korea, are purely energy-import dependent economies, stating:
<blockquote>
&#34;(Japan and South Korea) lack buffering mechanisms, and the current oil price shock is far more erosive to Asia than to the West.&#34;
</blockquote>
<h2>Crowded trades face loosening, doubts remain about the sustainability of the rebound</h2>
The previous strong performance of Asian stock markets has also subjected them to more severe capital outflow pressures in this round of de-risking. In 2025, the MSCI Asia-Pacific Index outperformed the S&amp;P 500 by the largest margin since 2017; despite recent pullbacks, it still leads U.S. stocks by about 7 percentage points this year, indicating that crowded long positions still have room for further loosening.
Elfreda Jonker, a client portfolio manager at Alphinity Investment Management, pointed out:
<blockquote>
&#34;The current sell-off is driven by multiple factors, not merely geopolitical shocks. Markets like South Korea, which have seen significant gains and high valuations, are particularly vulnerable at this time.&#34;
</blockquote>
It is noteworthy that Thursday's rebound also indicates that market sentiment may quickly reverse. UBS Global Wealth Management has upgraded its rating on South Korean stocks, believing that the 20% historic pullback and recent volatility reflect more of a technical liquidation rather than a substantive deterioration in fundamentals

EEMA

159189

The escalating situation in the Middle East is forcing investors to reassess the annual strategy of "sell America, buy Asia." The dual pressure of soaring oil prices and a strengthening dollar has led to capital outflows in Asian markets, which heavily rely on oil imports from the Middle East. The MSCI Asia-Pacific Index has fallen significantly more than U.S. stocks this week, with previous gains driven by artificial intelligence being concentrated for profit-taking. Analysts state that although a technical rebound occurred on Thursday, macroeconomic suppression factors remain, and crowded long positions still have room for further unwinding

- Investors are re-evaluating profitable stock strategies in light of Middle East tensions, with the once-popular "sell America, buy Asia" trade facing a critical turning point.  
- The MSCI Asia-Pacific index has dropped 6% this week, while the S&P 500 is down only 0.1%, indicating a shift of global funds back to the US for safety, coinciding with a strengthening dollar.  
- Asia's reliance on oil from the Strait of Hormuz makes it vulnerable to supply disruptions, impacting economic performance, particularly in South Korea and Japan, as inflation concerns hinder monetary policy flexibility.

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The escalation of the Middle East situation: Is the strategy of "selling America, buying Asia" about to reverse?