West Asia war triggers biggest foreign outflows from Asian stocks since 2008; India sees $10.17 billion exit

New Delhi: Foreign investors have pulled $50.45 billion from Asian equities in March, the biggest monthly outflow since the 2008 global financial crisis, as the widening conflict in West Asia fuels fears of an oil shock, rising inflation and slower growth across the region.

According to initial verified market data, the outflows span key Asian markets including South Korea, Taiwan, India, Indonesia, Vietnam, Thailand, the Philippines and Malaysia, as investors cut exposure to risk assets amid surging crude prices and rising global bond yields.

Taiwan saw the biggest outflows at $25.28 billion, followed by South Korea at $13.5 billion and India at $10.17 billion. Indonesia was the only major outlier, attracting a modest $59 million in inflows.

The selloff comes as the U.S.-Israel-Iran conflict has sharply raised concerns over prolonged disruption to energy supplies through the Gulf, especially via the Strait of Hormuz, a critical route for crude shipments to Asia. 

Brent crude has surged sharply this month, intensifying stagflation fears for energy-importing economies across the region.

For Asian markets, the oil spike is proving especially damaging because it is colliding with already elevated valuations in technology-heavy markets. Investors had piled into AI-linked and tech stocks across Taiwan, South Korea and India in recent months, leaving those markets more vulnerable to sharp reversals as rising oil prices and bond yields darken the outlook for growth and corporate earnings.

India’s exposure is particularly significant. The $10.17 billion in foreign outflows adds to the pressure already visible in domestic markets, where equities and the rupee have come under strain since the conflict escalated. The rupee recently hit a record low near 94 against the U.S. dollar, while benchmark equity indices remain sharply lower from pre-conflict levels.

The outflows are also compounding concerns over India’s external vulnerability. As a major oil importer, India remains highly sensitive to crude spikes, shipping disruptions and a stronger dollar. Traders are increasingly worried about imported inflation, pressure on the current account and the possibility that the Reserve Bank of India may have to tolerate a weaker rupee and higher bond yields if the external shock persists.

Across the broader region, investor positioning is increasingly reflecting expectations of a longer conflict rather than a short-lived disruption. Funds have been rotating toward cash and energy-linked names while cutting exposure to bonds, technology and other risk-sensitive sectors, as hopes of a quick diplomatic resolution remain fragile.

That sentiment has stayed weak despite brief relief rallies tied to U.S. President Donald Trump’s decision to delay a planned strike on Iran’s power grid. Markets steadied briefly, but renewed uncertainty over talks with Tehran and fresh oil supply concerns have kept investors in defensive mode.

For now, the message from capital flows is clear: foreign investors are pulling back from Asia at the fastest pace in nearly two decades as the West Asia war reshapes the region’s inflation, energy and growth outlook. 

India, with $10.17 billion in outflows in March, remains among the hardest-hit major markets as oil shock fears continue to ripple across equities, currencies and bonds.