Asian stocks rose Monday as investors looked past renewed Middle East tensions over the weekend, shifting focus back to fundamentals and the prospect of further talks.

The MSCI Asia Pacific Index rose as much as 0.8%, while the MSCI Emerging Markets Index erased all of its losses during the now almost two-month war in Iran. US futures pared earlier losses of as much as 1.1%. Oil and the dollar have also retreated from session highs. 

The moves suggest investors are now positioning for peak uncertainty to have passed, according to analysts and strategists. A more favorable outlook for negotiations, a revival of the artificial intelligence trade and renewed focus on corporate fundamentals as the earnings season unfolds are driving sentiment, they said.

Peak Uncertainty

While geopolitical tensions linger, the tone remains far from a full risk-off. Investors see a potential off-ramp given that the two sides remain open to talks. 

“I think markets are priced for an eventual deal to get on with life again in the Middle East,” said Matthew Haupt, portfolio manager at Wilson Asset Management. “We’re seeing a very mature response in equity futures so far, as we all know the destination, so are largely willing to look through it now.”

Lack of Conviction

Rapidly shifting headlines are making it difficult for investors to take high-conviction positions, as few want to be caught on the wrong side of the trade. Positioning remains light, with trading volumes across most Asian markets muted on Monday. The metric on Korea’s Kospi stock index, for example, was about 33% lower than the average of the past month.

The uncertainty was extended after President Donald Trump and Iranian officials offered disparate views on the next stage of the war, raising doubts over the prospects for peace talks before a ceasefire deadline.

“The immediate focus is on whether US-Iran talks will materialize,” said Shoji Hirakawa, chief global strategist at Tokai Tokyo Intelligence Lab. “It’s unlikely that Iran will ultimately call off the talks, so while investors may be hesitant to act, it’s difficult for them to adopt a bearish stance.”

Short Caution

Some market watchers highlighted the difficulty of taking a bearish stance as Asia’s major benchmarks including Japan’s Nikkei 225 and Taiwan’s Taiex index rebounded to record highs. The ratio of short-selling to overall daily trading of Japanese stocks has decreased since the beginning of the month, with the 5-day moving average falling to about 38.8% as of Friday from 41.8% on April 3. 

“When viewed on an index basis, the Nikkei in particular is near record highs, while in terms of contributions, the rise is being driven almost entirely by semiconductors,” said Hiroki Takei, a strategist at Resona Holdings. “This leaves room for upside driven by the rest of sectors.”

Earnings, AI

South Korean stocks rose more than 1% Monday, erasing the slide triggered by the Iran war, on the back of a rally in chipmakers as the AI trade swings back into investor focus. 

So far, Asia’s tech earnings are showing resilience amid the war. Taiwan Semiconductor Manufacturing Co. raised its revenue outlook for 2026 on solid AI chip demand while Samsung Electronics Co. posted an eightfold jump in quarterly profit. Earnings from Korean memory chipmaker SK Hynix Inc. due Thursday are among key upcoming catalysts for the tech trade. 

“We are getting to or already at peak uncertainty,” said Billy Leung, an investment strategist at Global X Management. “Asia has been the highest beta expression of the peace trade. The AI leg is structurally intact anyway. Memory flows are accelerating.”

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Published on April 20, 2026