• Shares of TSMC, the world's largest chip maker, fell more than 2.43%, dragging the Taiwan Weighted Index to close lower by 1.56%.
• Japan's trade balance reversed from 1.2 trillion yen deficit in May, or $7.7 billion, to a 224 billion yen surplus.

Most Asia-Pacific markets fell Thursday as chip-related stocks dropped following reports of more stringent export restrictions from the U.S. and as comments from former U.S. President Donald Trump raised geopolitical tensions.

Japan's Nikkei 225 dropped 2.36% to end the trading day at 40,126.35, while the Topix slid 1.6% to close at 2,868.63.

Shares of Tokyo Electron, which supplies Taiwan Semiconductor Manufacturing Company, plunged more than 8%. Other chip-related stocks such as Advantest and Organo dropped about 5% and 3%, respectively.

South Korea's Kospi dipped 0.67% to 2,824.35, while the small-cap Kosdaq lost 0.84% to wrap the session at 822.48. Samsung Electronics ended the day 0.23% higher.

Shares of TSMC, the world's largest chip maker, fell more than 2.43%, dragging the Taiwan Weighted Index to close lower by 1.56%.

Japan's exports rose 5.4% year on year in June, a steep decline from 13.5% in May. Imports grew 3.2% year on year last month, down from 9.5% in May. Both exports and imports missed Reuters expectations of 6.4% and 9.3% growth, respectively.

Japan's trade balance reversed from a 1.2 trillion yen ($7.7 billion) deficit in May, to a 224 billion yen surplus.

Hong Kong's Hang Seng index climbed 0.64% in its last hour of trading, while China's CSI 300 followed suit to end the day with a 0.55% rise to 3,520.93.

Australia's S&P/ASX 200 dipped 0.27% to conclude at 8,036.50. Data from the country's statistics bureau earlier showed the seasonally adjusted unemployment rate rose to 4.1% in June, a 0.1 percentage point increase from May.

Employment in Australia rose by around 50,000 people and the unemployed increased by 10,000 people, Bjorn Jarvis, head of labor statistics at the Australian Bureau of Statistics, said in a release. The participation rate rose to 66.9%, just 0.1 percentage point below the historical high of 67% in November last year.

Overnight in the U.S., the Dow Jones Industrial Average added 243.60 points, or 0.59%, to end at 41,198.08. This is the first time the index closed beyond 41,000. The broad S&P 500 shed 1.39%, with the information technology and communication services industries being the weakest performers in the session.

The Nasdaq Composite fell nearly 2.8% overnight — posting its worst day since December 2022.

The tech-heavy index slid 2.77% to end at 17,996.92 as investors continued to favor rate-sensitive stocks over big tech names amid optimism on possible rate cuts following Fed Chair Jerome Powell's caution on keeping rates higher for longer.

—CNBC's Alex Harring and Pia Singh contributed to this report.