Asian equities edged higher on Monday as Wall Street’s record-setting rally on Friday provided a floor of support, but gains were capped as investors awaited concrete progress in U.S.-Iran negotiations. The ceasefire deadline is fast approaching with no deal in sight, and uncertainty over whether the Strait of Hormuz is truly open kept risk appetite in check across the region.
South Korea: KOSPI Rises but Stays Below Recent Highs
The KOSPI closed at 6,219.09, up 0.44%, shy of setting new highs despite the positive backdrop from Wall Street. The index had broken above 6,000 earlier in the week and held those levels, but Monday’s session reflected caution ahead of the ceasefire expiration.
Tech and semiconductor names provided support, tracking Friday’s strong Nasdaq performance. However, the lack of a concrete breakthrough from the weekend round of U.S.-Iran talks in Pakistan limited upside conviction.
Japan: Nikkei Gains 0.6% as Tech Leads, Utilities Drag
The Nikkei 225 rose 348.99 points (+0.60%) to close at 58,824.89. The index touched an intraday high of 59,169.13 before pulling back on Hormuz uncertainty.
Semiconductor stocks led gains, with Renesas Electronics surging 6.35%, Lasertec jumping 5.43%, and Mitsubishi Electric climbing 4.98%. SoftBank Group rallied 5.46% and drugmaker Chugai Pharmaceutical rose 5.93%.
On the losing side, utilities and energy-linked stocks fell as oil prices remained volatile. Tokyo Gas dropped 3.91% and Chubu Electric Power lost 3.89%. Cable makers Furukawa Electric (-4.20%) and Fujikura (-4.04%) also declined.
China: Shanghai and Hong Kong Rise as PBOC Holds LPR Steady
The Shanghai Composite gained 0.76% to 4,082.13, while the Hang Seng Index rose 0.77% to 26,361.07, supported by tech gains.
The People’s Bank of China kept its benchmark loan prime rates unchanged — the 1-year LPR at its current level and the 5-year LPR steady — in line with expectations as Beijing balances growth support against currency pressure from the war-driven energy shock.
In Hong Kong, the session was divided along sector lines. Xinyi Solar led the Hang Seng gainers, surging 6.21%, with Sunny Optical (+3.35%) and Li Auto (+2.59%) also strong. Chinese banks rallied: China Construction Bank +2.30%, ICBC +2.28%, and Bank of China +1.96%.
Energy stocks were the clear losers. PetroChina fell 3.27% and CNOOC dropped 2.45% as oil prices remained under pressure from competing narratives about whether the Hormuz strait would truly reopen.
What’s Driving the Caution
The dominant macro factor across all markets Monday was the lack of clarity around U.S.-Iran negotiations. Key considerations include:
- Ceasefire deadline looming: The 10-day Israel-Lebanon ceasefire is nearing expiration with no extension confirmed. If it lapses, the fragile diplomatic window could close.
- Hormuz remains functionally closed: Despite Iran’s Friday declaration, ships that attempted to transit the strait turned back. The U.S. naval blockade remains in place, and BIMCO has advised vessels to avoid the area.
- Weekend Pakistan talks inconclusive: U.S. and Iranian negotiators held a second round of talks in Pakistan over the weekend but failed to produce a permanent deal.
- VIX rose 8.4%: Wall Street’s fear gauge climbed to 18.95, suggesting options traders are hedging against potential volatility despite the equity rally.
What to Watch This Week
- U.S.-Iran diplomatic progress: Any deal — or breakdown — will immediately move oil and equity markets across Asia.
- Oil supply reality: Asian refineries face the biggest supply crunch from the Hormuz closure. Inventory drawdowns could accelerate if the strait stays closed.
- China policy signals: With LPR unchanged, markets will look for fiscal or targeted stimulus measures as the energy crisis weighs on growth.
- Earnings season: Corporate results continue across Asia. The naphtha crunch is already biting Japanese companies, from bathtub makers to plastic producers.
Follow real-time Asian index data and macro indicators on ECONPLEX. Check this week’s key economic events on the economic calendar.