Asian Stocks Rally as AI Optimism Overrides Middle East Fears – Asia Market Wrap
Asian stocks advanced as investors doubled down on the artificial intelligence trade, largely brushing aside Middle East tensions even after President Donald Trump rejected Iran’s latest peace proposal, a move that pushed oil prices higher and weighed on bonds.
MSCI’s Asia Pacific equity index rose 0.6%, led by technology shares. South Korea, a major beneficiary of AI-related investment, surged 5% to a record high. A regional gauge of semiconductor companies also hit a fresh peak after the Philadelphia Semiconductor Index closed at an all-time high on Friday. Nintendo, however, dropped as much as 10% in Tokyo after warning about rising chip costs.
US equity futures were little changed after Wall Street benchmarks ended Friday at record highs. European markets were also set for a muted open.
While investors remained optimistic about technology stocks, developments in the Middle East pressured broader markets. Brent crude climbed 4.4% to above $105 a barrel after Trump rejected Iran’s latest proposal, effectively prolonging the closure of the Strait of Hormuz. Rising oil prices added to inflation concerns and pushed bond yields higher, with the 10-year Treasury yield rising four basis points to 4.39%.
The dollar, which has acted as a haven during the conflict, strengthened against all major peers. Gold slipped toward $4,700 an ounce as traders bet interest rates may remain elevated for longer.
Global equities have now recovered losses linked to the conflict and climbed to record levels as investors continue to wager that massive spending on AI infrastructure will support earnings growth. Asian markets in particular have benefited from strong demand for chipmakers, viewed as essential suppliers for the AI boom. More muted moves outside technology also suggest traders still expect tensions in the Middle East to eventually ease, despite ongoing uncertainty.
The pound edged slightly lower ahead of a speech from UK Prime Minister Keir Starmer aimed at heading off a leadership challenge. Starmer is expected to outline plans to revive the government’s standing, including efforts to strengthen ties with the European Union a decade after the Brexit referendum.
