Morgan Stanley predicts that Asian stock markets will experience a "significant pullback" due to the impact of the Middle East conflict.

Morgan Stanley stated that with the Middle East conflict posing risks to previously strong performing Asian growth stocks, Asian stock markets may suffer significant losses. Jonathan Garner, Chief Asian Stock Strategist at Morgan Stanley, wrote in a report that given the strong returns of Asian stock markets since the beginning of the year and their significant outperformance of U.S. stocks, Asian stock markets are expected to experience a "significant pullback" both in absolute and relative terms. While the value attributes may help support the performance of Japanese and South Korean stock markets, both countries are major energy importers. Considering the strong gains over the past 12 months, a certain degree of profit-taking is expected to occur in the broader process of reducing risk and reducing positions. Beneficiaries of the "high market early planting strategy" may have more sustainability, such as companies related to economic security and supply chain resilience. South Korean defense and "super cycle" related assets may be more resilient than during previous periods of oil price shocks. Companies like SK Bioscience may face pressure from rising upstream petrochemical raw material costs.