Asian Stocks Rise on Hopes Iran War Nearing End: Markets Wrap

Asian stock markets rose on Wednesday as investors welcomed signs of a potential de-escalation in the Middle East. The Kospi in South Korea, the Nikkei in Japan, and the Hang Seng in Hong Kong all gained ground, driven by optimism over U.S.-Iran tensions easing. The benchmark KOSPI surged more than 5% to around 5,310, rebounding sharply after a four-day decline. Japan’s Nikkei 225 climbed 4.48%, while Hong Kong’s Hang Seng Index gained over 2% according to reports.

The rally came after U.S. President Donald Trump said the U.S. military will be leaving Iran soon, with a potential timeline of two to three weeks. Trump indicated that a deal is not necessary for a withdrawal, emphasizing that the U.S. would leave once it is clear Iran cannot develop nuclear weapons. This statement reinforced investor sentiment, particularly for markets sensitive to global stability and energy prices.

Iranian President Masoud Pezeshkian also expressed willingness to end the conflict, provided certain guarantees are met. In a call with the European Council, Pezeshkian reiterated Tehran's readiness to de-escalate regional tensions but emphasized the need for assurances.

Why Did This Happen?

The global markets’ response to U.S.-Iran developments reflected a shift in risk appetite. Trump’s remarks were interpreted as a de-escalation signal, with the U.S. military likely to exit in weeks. This reduced fears of prolonged conflict and elevated expectations for economic stability.

Analysts noted that the comments were seen as more credible than previous signals, particularly on Iran’s side. Westpac Strategy Group highlighted that more concrete steps toward de-escalation are emerging, including from Iran, which has prompted a reevaluation of conflict outcomes by investors.

How Did Markets Respond?

Asian equity indices saw broad gains, with South Korea’s Kospi rising 7.1% and Japan’s Nikkei up 4.3%. The Taiex Index in Taiwan and the Hang Seng Index in Hong Kong also posted significant increases.

Technology and energy stocks led the gains, with Samsung Electronics and SK Hynix both rising over 7%. The Philadelphia Semiconductor Index surged more than 6%, driven by a rebound in AI-related stocks after a three-day losing streak.

Oil prices initially fell after Trump’s comments. Brent crude dropped to a session low of $98.35 before rebounding slightly to $101.81 per barrel. WTI crude also declined, settling at $98.79 per barrel. The market remained cautious about when the Strait of Hormuz could reopen and how quickly global supply chains could normalize according to analysis.

What Are Analysts Watching Next?

Market watchers are closely following Trump’s scheduled address on Wednesday evening for further clarity on the war’s trajectory. The speech is expected to outline the U.S. position and potential next steps in the region.

Analysts at Deutsche Bank noted that while the remarks were positive, they did not represent a material change in Iran’s stance. However, the signals from both sides have led to an extension of the market rally, with investors reassessing the risk profile.

Oil price analysts remain cautious. ING commodities strategists highlighted that even if the Strait of Hormuz reopens, it will take time for vessel backlogs to clear and for production and exports to return to normal levels. This suggests that energy prices may remain elevated for some time.

Investors are also watching for any further developments in trade talks and global economic data. The recent tankan survey in Japan showed strong manufacturing sentiment, supporting the Bank of Japan's gradual rate hike stance.