Global Tech Stocks Plunge: Chip Sell-off Deepens, Mortgage Rates Climb Amid Geopolitical Jitters

Global markets are in turmoil as a deepening sell-off in technology stocks and rising mortgage rates, exacerbated by renewed geopolitical tensions in the Middle East, weigh heavily on investor sentiment. Concerns regarding the sustainability of the artificial intelligence (AI)-driven rally have particularly hit the semiconductor sector, leading to significant declines across exchanges from Asia to Europe.

The tech sell-off originated in the US and quickly spread to Asian markets, with Japan's Nikkei 225 index dropping nearly 5%, Japanese chipmaker Kioxia slumping 16%, and China's SSE Composite index falling 3.3%. Europe mirrored this trend, as the Stoxx Europe 50 index declined by approximately 1% and the broader Stoxx Europe 600 index fell 0.5%. Among the hardest hit were major chip companies: Dutch chip manufacturing equipment specialist ASML Holding (ASML) saw its shares drop by 4.6%, German chip producer Infineon Technologies (IFX) also declined by around 4.6%, and tech investor Prosus (PRX) fell 3.6%.

These widespread declines reflect growing investor nervousness about whether the AI-driven market rally this year is sustainable. Analysts are calling the chip stock sell-off a “momentum crash,” noting that the unwinding of leveraged positions is likely exaggerating the decline. Despite some reports indicating ASML had recently raised its 2026 sales outlook, and TSMC posted strong Q2 profits, the broader market sentiment was overshadowed by concerns over “stretched valuations and ever-high expectations.”

Parallel to the tech stock slump, US mortgage rates have surged to near one-year highs amidst renewed Middle East tensions. The average 30-year fixed mortgage rate reached 6.55% for the week ending July 16, up from 6.49% the previous week. This increase is directly linked to the escalating conflict between the US and Iran, particularly concerns over the control of the Strait of Hormuz, which has driven up oil prices and bond yields, fueling inflation fears. The Strait of Hormuz is a critical chokepoint, accounting for roughly 20% of global oil transportation.

The geopolitical risks in the Middle East are causing significant disruptions to energy markets and shipping costs globally, leading to increased inflation risks. Brent crude prices have climbed to $84.75 per barrel, and US crude to $79.8 per barrel, both on track for weekly gains exceeding 11%. The World Bank and other institutions anticipate that higher energy prices will slow global growth and increase inflation in most economies. Elevated borrowing costs are also negatively impacting housing activity, with existing home sales having slipped 2.4% in June.

Analysts and market expectations point to a challenging opening for US stock markets. The overall sentiment for the tech sector is perceived as neutral to negative in the short to mid-term. Mortgage rates are generally expected to remain in the mid-6% range for the majority of 2026. While AI demand was projected to drive the semiconductor industry to record revenues in 2026, the current sell-off raises serious questions about the sustainability of this optimistic outlook.