Hong Kong stocks extended losses Thursday as a flare-up in Middle East tensions hurt risk appetite.

The Hang Seng Index fell by around 379.81 points, or roughly 1.5%, to end at 25,253.40, while the Hang Seng China Enterprises Index decreased by 94.68 points, or around 1.1%, to close at 8,501.91.

Renewed hostilities between the US and Iran jolted investor confidence across Asian markets Thursday, Reuters reported. The overnight clashes, which involved Kuwait and Bahrain, mark the most significant escalation since a ceasefire took effect in early April and threaten to undermine ongoing US-Iran talks over extending the truce and reopening the Strait of Hormuz.

Elsewhere, China slammed the U.S. for alleging the use of forced labor in the country as a pretext for additional tariffs.

"There is no such thing as 'forced labor' in China, and we oppose using this as a pretext for political manipulation," Beijing's Foreign Ministry Spokesperson Mao Ning said in a regular press briefing.

The Office of the United States Trade Representative recently proposed additional taxes on imports from 60 regions, including China and Hong Kong, over forced-labor trade practices, calling for a 10% additional tariff for economies that have partially enforced bans on the importation of certain forced labor goods, and a 12.5% tariff for all others.

In local development, Hong Kong's Exchange Fund is seeking investment managers for a mandate tied to the S&P 500 Index, Bloomberg News reported.

The HK$4.3 trillion fund has been reviewing proposals in recent months and is looking for a low-tracking-error strategy that closely mirrors the benchmark's performance, according to the report.

In corporate news, Luye Pharma (HKG:2186) proposed issuing $180 million of 5.25% convertible bonds due 2031 and concurrently repurchasing its outstanding $180 million 6.25% convertible bonds due 2028.

The company's shares closed nearly 15% lower.