Global funds are withdrawing record amounts from Asian markets, pulling out $11 billion from emerging Asian stocks excluding China this week. The exodus marks the fastest pace of capital flight since March 2022, triggered by escalating tensions in Iran that have sent investors scrambling for safer assets.

Taiwan has suffered the largest hit with a record $7.9 billion outflow, while South Korea lost $1.6 billion and India saw $1.3 billion withdrawn. The MSCI Asia Pacific Index has tumbled more than 6% this week, on track for its worst performance in nearly six years. The selloff has triggered trading halts in some markets and sent Korea's Kospi index to a record one-day drop.

The outflows represent a dramatic reversal of the "Sell America, Buy Asia" strategy that had driven capital flows earlier this year. Investors had been rotating into Asian equities betting on a weaker dollar and subdued inflation, but the Iran conflict has upended these assumptions. Gary Tan of Allspring Global Investments noted that investors are now reassessing whether heightened risk aversion could keep the dollar firmer for longer and whether higher oil prices might reignite inflation pressures.