Asian stock markets edged higher on Monday, supported primarily by modest rallying in technology names, even as investor caution persisted following an escalation in tensions between the U.S. and Iran.
During Asian hours U.S. equity futures moved lower after Wall Street delivered record readings last week, but the regional advance found footing in tech sectors that tracked the strong U.S. close of the prior session.
Geopolitical developments over the weekend weighed on sentiment. U.S. forces seized an Iranian-flagged cargo vessel in the Gulf of Oman after reports said the ship attempted to breach a naval blockade. The action came amid increasingly forceful rhetoric from U.S. President Donald Trump, who warned of possible strikes on Iranian infrastructure if a deal was not reached.
Despite those developments, some investors appeared to take the threats in stride, noting a pattern of abrupt policy shifts in prior episodes that have at times produced rapid market moves. That backdrop left traders looking to technology stocks for support.
In national market moves, Japan's Nikkei 225 rose 1%, while the broader TOPIX advanced 0.7%. South Korea's KOSPI gained 1.1%, with chipmaker SK Hynix (KS:000660) jumping more than 3% after announcing it will begin production of its SOCAMM2 server module designed for Nvidia's next-generation Vera Rubin chips.
China's central bank held its benchmark loan prime rates steady for an 11th month. The one-year LPR remained at 3.00% and the five-year LPR at 3.50%, matching expectations and signaling a cautious policy stance as the economy continues to recover.
Chinese markets climbed on the news, with the Shanghai Composite up 0.8% and the blue-chip Shanghai Shenzhen CSI 300 edging 0.7% higher. Hong Kong's Hang Seng also rose, gaining nearly 1%.
Yet the regional advance was capped by stronger energy prices, which tend to pressure oil-importing economies and stoke inflation concerns. Oil prices surged amid renewed tensions after the Strait of Hormuz was closed, tightening the outlook for energy supply and limiting broader equity gains.
Elsewhere in the region, futures tied to India's Nifty 50 index fell 1%. Singapore's Straits Times Index inched up 0.2%, while Australia's S&P/ASX 200 traded largely flat.
Key points
- Technology stocks provided the primary lift for Asian markets following strong U.S. closes.
- The People's Bank of China left the one-year LPR at 3.00% and the five-year LPR at 3.50% for the 11th month.
- Rising oil prices, after the closure of the Strait of Hormuz, limited gains and renewed inflation concerns, particularly for oil-importing economies.
Risks and uncertainties
- Escalating U.S.-Iran tensions, including the seizure of an Iranian-flagged cargo ship, could keep volatility elevated in energy and regional equity markets.
- Higher energy costs pose inflationary pressure on oil-importing countries, which may constrain economic growth and corporate margins.
- Policy uncertainty - reflected by a cautious central bank stance in China - leaves room for limited upside if recovery momentum weakens.