Asian equities traded unevenly on Wednesday as uncertainty around a US–Iran breakthrough grew after Washington’s attacks on southern Iran. Japan’s Nikkei 225 edged up 0.1% to about 65,070, while China’s Shanghai Composite fell almost 1% to around 4,105. Hong Kong’s Hang Seng dropped more than 1% to near 25,320, but South Korea’s KOSPI climbed 2.25% to roughly 8,230.
South Korean shares led gains as chipmakers rallied, with SK Hynix joining the $1tn market-capitalisation club alongside Samsung Electronics. Samsung entered the group earlier this month after reporting an eight-fold rise in operating profit in Q1FY2026, while SK Hynix was boosted by strong demand for high-bandwidth memory used in AI servers and accelerators. In geopolitics, Iran condemned what it called “defensive strikes” by US Central Command, with its foreign ministry describing the attacks as a “gross violation” of a ceasefire. Even so, talks towards a permanent deal were described as continuing, with an Iranian official saying the unfreezing of Iran’s funds remained the final major sticking point, being addressed via Qatar mediation, although no official confirmation was provided.
AI Chipmaker Rally and Cross-Market Strategies
We see the powerful rally in South Korean chipmakers as a key trend to follow in the coming weeks. The demand for AI-related hardware is showing no signs of slowing down, with the global AI chip market forecast to grow by over 35% this year alone. We are considering buying call options on key semiconductor names or related ETFs to leverage this continued upward momentum.
The divergence between South Korea’s surging KOSPI and the weaker performance in Chinese markets presents a clear opportunity for a pairs trade. Recent manufacturing data out of China has been underwhelming, with the Caixin Manufacturing PMI unexpectedly dipping to 49.7, indicating a slight contraction and fueling concerns. Therefore, we are looking at going long KOSPI 200 futures while simultaneously shorting Hang Seng Index futures to play this widening performance gap.
Geopolitical Tensions and Energy Market Volatility
The escalating tensions between the US and Iran are injecting volatility into the market, specifically in the energy sector. Any disruption to ceasefire negotiations could threaten oil supply routes in the Strait of Hormuz, through which about 20% of the world’s total oil consumption passes daily. To hedge against a potential price shock, we are buying out-of-the-money call options on Brent crude futures, as similar regional conflicts have historically caused sharp, sudden price spikes of over 10% in a single day.
