Asia-Pacific equity markets opened the week on a sharply divided footing, as a surging AI-driven tech rally in South Korea clashed with a renewed Middle East risk premium that sent oil prices above $100 a barrel and rattled broader sentiment across the region.
Key takeaways
- South Korea’s AI-driven tech surge pushed the Kospi to a fresh all-time record, with semiconductor stocks leading gains across the region.
- Trump’s rejection of Iran’s ceasefire proposal reignited Middle East tensions, pushing Brent crude above $103 and reversing last week’s peace optimism.
- China’s inflation data beat forecasts but analysts warn the rise reflects energy cost pressures rather than genuine demand recovery.
The MSCI Asia Pacific index advanced 0.6% on the back of semiconductor strength, even as energy markets flashed warning signs.
Seoul Steals the Show
South Korea’s Kospi surged 5% to a fresh record, cementing its status as the region’s clearest proxy for AI infrastructure demand. The Kospi 100 jumped 5.54% to 9,395.53, with chipmaker SK Hynix leading individual gainers, up 11.51%, followed by LG Innotek at 10.26% and Hyundai Mobis at 8.64%. The move followed Friday’s record close in the Philadelphia Semiconductor Index, which continued to energize chip-linked equities across the region.
“South Korea surged 5% to a fresh record, reinforcing its position as one of the cleanest regional expressions of AI infrastructure demand,” said Patrick Munnelly, market strategy partner at TickMill.
Oil Crosses $103 as Trump Rejects Iran Proposal
The session’s defining macro development came from the Middle East. Oil prices climbed sharply after President Donald Trump rejected Tehran’s latest ceasefire proposal, raising fears that the conflict and disruption around the Strait of Hormuz could be prolonged. Iran’s semi-official Tasnim news agency reported the counteroffer had called for an end to hostilities on all fronts and a lifting of sanctions, but Trump dismissed the response on Truth Social as “TOTALLY UNACCEPTABLE.”
Brent crude futures rose 2.18% to $103.50 per barrel on ICE, while West Texas Intermediate on NYMEX gained 2.11% to $97.43. Israeli Prime Minister Benjamin Netanyahu separately stated on Sunday that the war with Iran was “not over,” as both the US and Israel continued efforts to curtail Tehran’s nuclear program.
Munnelly noted that Trump’s rejection had “effectively reversed last week’s peace deal optimism,” with Brent reverting close to levels seen before a brief relief rally the previous Wednesday.
Bond Yields Rise; Dollar Firms
The oil price surge fed directly into fixed-income markets. The 10-year US Treasury yield rose four basis points to 4.39%, while the dollar strengthened against major peers as a combination of geopolitical risk and higher-for-longer rate expectations weighed on sentiment. Gold slipped toward $4,700 per ounce despite the uncertain risk environment, with safe-haven demand offset by rising real-yield pressure.
China Posts Surprise Inflation Beat
Chinese equities outperformed, with the Shanghai Composite rising 1.08% to 4,225.02 and the Shenzhen Component gaining 2.16% to 15,899.30. The advance came alongside a significant upside surprise in domestic inflation data.
China’s producer price index rose 2.8% year-on-year in April, the highest reading since July 2022, well above Reuters poll forecasts of 1.6%, and ending a 41-month deflationary streak. Consumer prices rose 1.2% year-on-year, beating expectations of 0.9%.
However, analysts cautioned against reading the figures as a sign of genuine demand recovery. Munnelly described the detail as pointing “more to cost-push inflation from energy than a demand-led revival,” a dynamic he said was “less helpful for risk assets because it squeezes margins and real incomes without necessarily improving volumes.”
Japan and Australia Lag; Nintendo Tumbles
Japan’s Nikkei 225 fell 0.47% to 62,417.88, weighed down by a sharp 8.44% decline in Nintendo after the games developer announced it would raise Switch 2 prices while flagging an expected drop in console sales. SoftBank Group shed 6.33%. Australia’s S&P/ASX 200 also declined, falling 0.49% to 8,701.80, with CSL the session’s standout loser at -15.96%.
Outlook
With Trump’s planned trip to China later in the week. where he was expected to meet President Xi Jinping, markets face a week heavy with geopolitical crosscurrents. Outside of the AI trade, Munnelly warned, “the breadth is telling: price action is far less convincing.” For now, the region’s bulls remain dependent on the semiconductor trade to carry the weight.
