-- Most Asian stocks fell sharply on Friday after reports of Israeli strikes on Iran further ramped up concerns over worsening geopolitical conditions in the Middle East, while persistent warnings on U.S. interest rates also battered sentiment.

Steep losses in chipmaking and technology stocks weighed, especially following a somewhat negative outlook on chip demand from sector heavyweight Taiwan Semiconductor Manufacturing Corp (NYSE:). 

Reports of Iran explosions batter risk appetite

Regional stocks fell sharply in morning trade after media reports of explosions across Iran ramped up concerns that Israel had struck back against Tehran over an attack last week. 

Iranian news reports also said the explosions were close to Iran’s nuclear facilities in Isfahan, which could mark a severe escalation in the Middle East conflict. 

The reports severely dented risk appetite, sparking broad-based losses across Asian markets. Japanese stocks were the worst hit, with the index falling 3.4%, while the lost 2.3%.

Data on Friday showed Japanese consumer inflation grew largely as expected in March. 

Australia’s index slid nearly 2%, while losses in heavyweight tech stocks dragged South Korea’s down 3.1%. 

Losses in China were somewhat limited by persistent optimism over more stimulus measures. The and indexes lost 0.6% and 0.12%, respectively.

But losses in tech dragged Hong Kong’s index down 1.5%. 

Futures for India’s index pointed to a negative open, with the index likely to track declines in its regional peers. 

Tech stocks, chipmakers slump as TSMC flags weaker outlook 

Technology stocks were the worst performers in Asia on Friday, with chipmakers leading losses after heavyweight TSMC (TW:) scaled back its outlook for expansion in the chip industry this year. The stock slid over 6% in Taiwan trade. 

TSMC still posted strong earnings growth, and even flagged a positive earnings outlook. But this was largely overshadowed by a cut to the chipmaker’s forecast for 2024 semiconductor market growth, with TSMC citing weak demand for consumer electronics as largely outweighing improved demand from the artificial intelligence sector. 

TSMC acts as a bellwether for the broader chip industry, with its outlook sparking losses across the board. 

South Korea’s (KS:) and (KS:) slid 5.8% and 3.5%, respectively, while Japan’s (TYO:) and (TYO:) lost 5.7% and 7.5%. 

China’s Semiconductor Manufacturing International Corp (HK:) shed 1.9%. 

Rate fears also weigh as Fed’s Bostic flags potential hike

A slew of hawkish comments from Federal Reserve officials also weighed on risk appetite, especially as Atlanta Fed President Raphael Bostic warned that the bank could even hike interest rates if inflation remained sticky. 

Bostic’s comments capped a week of hawkish signals from the Fed, which saw traders sharply price out expectations for a June rate cut.

Wall Street indexes fell on Thursday, while U.S. stock index futures extended losses in Asian trade. , and fell between 1% and 2% after the Iran reports.