Asian stock markets experienced a robust rally on Tuesday, with South Korea's benchmark Kospi index surging to an unprecedented record high as traders returned from a public holiday. This surge was primarily fueled by burgeoning hopes for a significant breakthrough in the delicate U.S.-Iran peace negotiations.
Investor sentiment received a notable boost following comments from President Donald Trump on Monday, who indicated that talks with Iran were "proceeding nicely." However, Trump also issued a stern warning, stating that the U.S. could resume military actions if the negotiations faltered, underscoring the fragile nature of the diplomatic efforts.
The geopolitical developments led to mixed reactions in oil markets. International benchmark Brent crude futures for July gained 2.09% to reach $98.15 per barrel. In contrast, West Texas Intermediate (WTI) futures for July saw a decline of 5.13% to $91.64 per barrel by early Tuesday ET. It's worth noting that WTI had no price settlement on Monday due to the Memorial Day holiday in the U.S.
Adding a layer of complexity to the Washington-Tehran dialogue, the U.S. Central Command confirmed "self-defense strikes" against Iranian missile launch sites and vessels allegedly attempting to lay mines in the southern part of the Islamic Republic. This ongoing military activity highlights the inherent risks despite the diplomatic overtures.
Amidst these tensions, former CIA Director David Petraeus remarked to CNBC's Lisa Kim at the UBS Asian Investment Conference that Tehran appeared to be "blinking" concerning the critical Strait of Hormuz, suggesting a potential shift in their stance.
Currency dealers monitor exchange rates in a foreign exchange dealing room at the Hana Bank headquarters in Seoul on May 15, 2026.
Jung Yeon-je | Afp | Getty Images
On the market front, South Korea's Kospi index climbed 2.55% to close at 8,047.51, after touching an all-time intraday high of 8,131.15. The smaller-cap Kosdaq also registered gains, finishing 0.98% higher.
Meanwhile, Japan's Nikkei 225 experienced a slight pullback, ending Tuesday's session 0.25% lower at 64,996.09, largely due to profit-taking after having breached the 65,000 mark for the first time on Monday during holiday-thinned trading. The broader Topix index also saw a marginal dip, while Bank of Japan Deputy Governor Ryozo Himino reiterated that the timing of a rate hike remains under consideration, with the central bank closely monitoring Middle East developments.
Elsewhere in the Asia-Pacific region, Australia's S&P/ASX 200 declined by 0.39% to 8,657.80. China's CSI 300 posted a gain of 0.22%, and Hong Kong's Hang Seng index reversed its earlier losses to rise 0.3% following its own public holiday on Monday.
India's Nifty 50 traded choppily to remain largely unchanged, and the BSE Sensex also held flat.
Looking ahead to U.S. trading, futures indicated a positive open, with S&P 500 futures up 0.78%, Nasdaq-100 futures advancing 1.14%, and Dow Jones Industrial Average futures popping 371 points, or 0.73%, reflecting a recovery after U.S. stock markets were closed for the Memorial Day holiday on Monday.
— CNBC's Fred Imbert and Lim Hui Jie contributed to this report.
