* Chipmakers continue to drag stock indexes lower

* Markets in S.Korea closed for a holiday

* Nasdaq futures down 1.6%, S&P 500 futures fall 0.85%

* Oil prices up more than 10% for the week

* Japanese authorities back to jawboning as yen struggles

(Updates before European open)

By Rae Wee

SINGAPORE, July 17 (Reuters) - A brutal selloff in

chipmakers rippled through global markets on Friday, triggering

a rout across Asia and setting up steep losses in Europe and the

U.S. as investors abruptly reassessed the durability of the

artificial intelligence-driven rally.

Investors fled risk across Asia, sending MSCI's broadest

index of Asia-Pacific shares outside Japan down

2.7%, while the Nikkei tumbled more than 5%, leaving it

down more than 13% from its recent peak.

Taiwan's stock market bore the brunt of the selloff,

plunging more than 6% for its worst day since U.S. President

Donald Trump's "Liberation Day" tariffs, while China's blue-chip

index fell 4%.

In Hong Kong, the Hang Seng Index slid 2.5%, and a 5%

drop in the Hang Seng Tech Index also marked its

sharpest fall since April 2025.

The selloff came even as Taiwan's TSMC announced

second-quarter profit that blew past forecasts and ASML

, the world's dominant supplier of equipment needed to

make high-tech computer chips, raised its 2026 sales forecasts

earlier this week.

"Retail investors have borrowed to trade in this really

impressive AI rally, so I think the unwinding of leveraged

positions will definitely exaggerate the decline as well. It

will feed into the market," said Fabien Yip, a market analyst at

IG.

"If tonight, the sell-off continues into the U.S. session, I

think Korea, when it reopens, is going to be quite disastrous."

Markets in South Korea were closed on Friday for a holiday,

a day after authorities announced they will temporarily ban new

listings of exchange-traded funds (ETFs) that are tied to

certain major technology firms, while raising minimum required

deposits for retail investors to invest in such products, in an

effort to curb volatility.

In Europe, EUROSTOXX 50 futures slid 1%. DAX

futures were down 0.8% and FTSE futures eased

0.43%.

Nasdaq futures slumped 1.6% while S&P 500 futures

fell 0.85%.

OIL CLIMBS AGAIN

In commodities, oil prices were on the rise, with Brent

crude futures up 0.1% at $84.30 a barrel, while U.S.

crude advanced 0.27% to $79.16 per barrel.

Iran said it launched fresh attacks on U.S. facilities in

the Gulf on Friday after a sixth consecutive night of U.S.

strikes on Iranian military facilities, as last month's truce

descended into daily attacks and counterattacks.

For the week, Brent and U.S. crude futures were set to rise

more than 10% each, marking their largest gains since April.

"The U.S. and Iran are further away from seeing eye-to-eye,"

said Thierry Wizman, global FX and rates strategist at

Macquarie.

"The next few days may determine which side has 'overplayed

its hand', but not without the risk of seeing some oil

infrastructure destroyed in the process."

Trade tensions also returned to the fore, after the U.S.

imposed new 25% tariffs on Brazil.

Elsewhere, spot gold was up 0.5% at $3,990.22 an

ounce.

ASSESSING THE FED RATE PATH

The dollar held steady on Friday and was set to end the week

little changed as receding expectations of Federal

Reserve rate increases this year were offset by renewed

safe-haven demand.

Investors are now pricing in roughly 27 basis points worth

of Fed hikes by December, following benign U.S. CPI

and PPI readings this week.

The euro was flat at $1.1442 while sterling

fetched $1.3466.

The yen, meanwhile, languished near a 40-year low and

last stood at 162.39 per dollar, prompting renewed jawboning

from Japanese Finance Minister Satsuki Katayama to try and

support the currency.