Soaring oil prices impact economic prospects, with the scale of foreign investment outflow from emerging Asian stock markets expected to reach record levels.

With the Middle East conflict leading to a surge in oil prices and casting a shadow over the prospects of the Asian region, global investors are pulling out a record amount of funds from emerging Asian stock markets that do not include China. Since the eruption in the Middle East, foreign investors have sold around $52 billion worth of Asian stocks, making it likely to be the largest monthly outflow of funds recorded in the region since data began in 2009. Markets with high dependence on oil imports, such as Taiwan, South Korea, and India, are at the forefront of the outflow of funds. The soaring oil prices are putting pressure on net energy-importing economies mainly located in Asia. The outflow of funds from the stock market this month has exceeded the outflow caused by the pandemic in March 2020 and is more than twice the outflow in June 2022 (following the Russia-Ukraine conflict). Gary Tan, fund manager at Allspring Global Investments, said, "We may see some short-term rotations towards markets less affected by the Middle East energy shock, and this situation may continue until the Middle East situation becomes clearer. Asia accounts for 80% of the crude oil demand passing through the Strait of Hormuz, so any disruption in the strait would have a disproportionate impact on inflation and growth prospects in the region compared to other regions." Asian stock markets are facing pressure this month, performing worse than their American counterparts. As the United States is a net energy exporter, its stock market has maintained relative resilience. The relative strength of the US dollar and profit-taking in chip stocks have exacerbated the pressure on Asian stock markets. Last week, Morgan Stanley strategists advised investors to sell during a rebound in Asian stock markets, citing the region's susceptibility to continued oil disruptions. Meanwhile, investors remain cautious about the prospects of a US-Iran ceasefire. While the US claims negotiations are ongoing, Iran's response has led investors to remain cautious.