Market rebound: Why some stocks are looking past the Iran war

(CNN) — The US stock market isn’t the only market that’s rebounded to record highs.

Stock indexes in Taiwan, South Korea and Japan have clinched fresh records in recent trading sessions, bouncing back after tumbling in March.

Asian countries are heavily reliant on oil imports from the Middle East that have largely stalled since the Iran war. But the hit to their economies hasn’t stopped their stock markets from surging in recent weeks.

South Korea’s benchmark Kospi index and Taiwan’s Taiex index both hit a record high on Wednesday. Japan’s benchmark Nikkei 225 hit a record high last week. Meanwhile, the S&P 500 and Nasdaq Composite in the US also both clinched record highs on Wednesday.

The enthusiasm in Asian and US markets is largely thanks to the global AI boom. The AI-driven rally has overshadowed some of the risks from the war with Iran. Semiconductor chips are in high demand because of the push to build AI infrastructure, which has particularly benefited markets in Asia.

By comparison, markets in countries that don’t have the same level of exposure to AI – like Europe – haven’t seen these gains.

“Different regions have different potential tailwinds, but like the US, much of Asia is poised to benefit from the AI capex cycle,” said Daniel Skelly, head of Morgan Stanley’s wealth management market research and strategy team.

South Korea and Taiwan shine

The United States is a net-energy exporter, while countries like Japan and South Korea are net-energy importers. This means economies in Asia have felt more of the pain of higher oil prices.

But in markets, the AI hype is lifting stocks despite concerns about higher energy costs and potential hits to consumer spending and economic growth.

South Korea is a global leader in semiconductor chips, and its stock market has surged: The Kospi gained nearly 76% in 2025, its best year since 1999, and is already up 75% so far this year. On Thursday, the surge sent the Korean equity market past Canada’s to the world’s seventh largest.

Samsung Electronics soared this week to surpass $1 trillion in market value, the second Asian company after Taiwan Semiconductor Manufacturing Company, known as TSMC, to hit the milestone.

Meanwhile, Taiwan’s Taiex is up 16% since the war began. The Taiex is up 42% this year. Taiwan in April became home to the world’s sixth-largest stock market, also surpassing Canada’s market.

“Asian markets are reacting well to the latest peace efforts and the chipmaker momentum,” Jim Reid, head of global macro research at Deutsche Bank, said in a note.

The Strait of Hormuz effectively closed at the start of March, choking off a fifth of the global oil supply. Japan’s Nikkei 225 was down a swift 13% by March 31.

But the index rebounded sharply just like US stocks, erasing its war-related losses and hitting a record high on April 16. The Nikkei is up 1% since the war with Iran began and up 18% so far this year.

Investors have leaned into optimism about an end to hostilities, but the swift rally also underscores the significance of the global AI rally. Artificial intelligence, semiconductor companies and data center-related companies account for about 50% of the weight of Japan’s Nikkei 225, according to JPMorgan Chase.

“Investors have gone back to the comfort of where they’re seeing earnings being delivered, and where are earnings being delivered? It’s US tech, it’s the AI ecosystem,” said Arun Sai, senior multi-asset strategist at Pictet Asset Management.

Mixed bag for other global stocks

While markets in Asia continue to hit records, markets in Europe remain below their pre-Iran war levels.

Similar to Asia, Europe is dependent on the Middle East for oil. But Europe has fewer tech and AI-focused companies compared to the United States and Asia. That’s part of reason the region’s markets have yet to reclaim record highs.

Germany’s Dax is still down more than 1% since the war began and is roughly flat on the year. Europe’s benchmark STOXX 600 index is down nearly 2% since the war began, though it’s up 5% this year.

Meanwhile, energy-exporting countries in South America have gotten a boost from higher oil prices. Brazil’s Bovespa Index is roughly flat since the war with Iran began but is up 16% this year.

“Asia doesn’t have energy, but it has AI. Latin America doesn’t have AI, but it has energy. Europe doesn’t have much of either,” David Russell, head of global market strategy at TradeStation, said.

The-CNN-Wire
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