Equity markets across Asia fell further on Tuesday as fresh tensions tied to the U.S., Israel, and Iran sustained a risk-off tone. The KOSPI in South Korea led regional losses following a long weekend, while airline and tourism stocks broadly weakened. At the same time, energy names rallied as crude prices climbed, reflecting investor concern about supply disruptions and inflationary pressure.
Sentiment remained fragile after a volatile session on Wall Street, where futures on the S&P 500 were down 0.6% by 21:31 ET (02:31 GMT). Public statements from officials in the United States, Israel, and Iran offered little evidence of de-escalation, contributing to the cautious mood among market participants.
South Korea leads regional declines
South Korea’s KOSPI was the weakest index in Asia on Tuesday, plunging 4.3% as trading resumed after a public holiday. The drop reflected both geopolitical concerns and a wave of profit-taking after a strong February showing. Major technology names that had benefited from optimism around artificial intelligence - SK Hynix Inc (KS:000660) and Samsung Electronics Co Ltd (KS:005930) - together with automaker Hyundai Motor (KS:005380) fell sharply, each slipping between 5% and 8%.
Japan’s equity benchmarks also came under pressure. The Nikkei 225 and TOPIX each declined by more than 2%, with a mix of domestic economic data and comments from policymakers adding to investor uncertainty. Capital spending posted a sharp increase in the fourth quarter, indicating some resilience in business investment. However, separate figures showed an unexpected rise in the unemployment rate in January.
Monetary policy remarks were another factor in Tokyo. Bank of Japan Deputy Governor Ryozo Himino said on Monday that the central bank will likely continue raising interest rates, a hawkish-leaning comment that weighed on sentiment.
China and Hong Kong: muted declines, selective strength
China’s onshore benchmarks were relatively restrained, with the Shanghai Shenzhen CSI 300 and the Shanghai Composite each falling about 0.2%. Market attention is focused on a set of leadership meetings scheduled between March 4 and March 11, during which China’s top leadership is set to outline the 15th five-year plan for 2026-2030. The plan is expected to emphasize technology and industrial development. Recent local media reporting has also suggested Beijing may present further stimulus measures amid several years of sluggish growth.
Hong Kong’s Hang Seng index dipped about 0.2%, but gains in energy and select technology stocks limited broader losses. PetroChina (HK:0857), CNOOC Ltd (HK:0883), and ENN Energy Holdings Ltd (HK:2688) rose between 1.9% and 4.0% and ranked among the stronger performers on the Hang Seng. Video game developer NetEase Inc (NASDAQ:NTES) added 3.3% after Morgan Stanley reiterated an Overweight rating, citing the stock’s potential inclusion in a Mainland China trading program as a catalyst.
Other regional moves and indices
Singapore’s Straits Times bucked the regional downtrend and gained 0.9%, driven by local energy stock strength. Futures for India’s Nifty 50 were down 0.6% on Tuesday, following a 1.2% slide in the cash index on Monday.
Across the Pacific, Australia’s ASX 200 fell 1.3% as markets prepared for fourth-quarter gross domestic product data due on Wednesday. Data released earlier in the day pointed toward a potentially weak Q4 print, with Australia recording a much larger than expected current account deficit in the quarter. The contribution to GDP from exports fell 0.1% in Q4, suggesting limited near-term support from the mining sector.
Australian monetary policy remarks added to investor caution. Reserve Bank of Australia Governor Michele Bullock suggested the bank may raise interest rates again in March and warned that inflationary shocks from a prolonged Middle Eastern conflict would be considered. Bullock said the RBA’s March meeting will consider all possibilities.
Sectors on the move
Energy stocks were among the best performers regionally as oil prices extended gains, reflecting market concern about potential supply disruptions. Conversely, airlines and tourism-related equities fell amid heightened uncertainty over travel demand.
Technology and auto names, particularly in South Korea, suffered notable losses after recent strong performance, as investors pared positions.
Outlook and positioning
Investors in the region appeared to be positioning cautiously, awaiting further signals from both geopolitical developments and scheduled policy and economic events, including the China leadership meetings and several key domestic data releases that may influence central bank settings.
Given the current backdrop, market participants are monitoring the interplay between oil-driven inflation risks, disruptions to global trade, and prospective shifts in monetary policy rhetoric across major central banks.