The resilience of Asian markets underscores the extraordinary influence of the AI sector, which continues to attract massive investor interest and fuel demand for semiconductors, advanced memory chips, and data-center infrastructure. Even as oil prices jumped on fears of supply disruptions in the Gulf region, traders remained focused on technology-driven growth opportunities.
Middle East Tensions Return to the Spotlight
Investor sentiment was tested after reports emerged of fresh military action between Washington and Tehran over the weekend.
Although diplomatic efforts aimed at easing tensions appear to be ongoing, uncertainty persists. U.S. President Donald Trump offered little insight into the state of negotiations, posting only that everyone should "just sit back and relax."
Meanwhile, Defense Secretary Pete Hegseth signaled on Saturday that military operations could resume if negotiations fail to produce a breakthrough.
Those warnings appeared to materialize quickly. Reports on Monday indicated that U.S. forces had launched strikes against Iranian targets over the weekend, prompting retaliatory actions from Tehran. Kuwaiti air defenses were also reportedly engaged in intercepting incoming missile and drone attacks.
Adding to regional instability, Israel continued military operations deeper into Lebanon as it intensifies its campaign against the Iranian-backed Hezbollah movement.
Despite the heightened geopolitical risks, analysts believe the broader economic fallout may remain manageable if critical shipping routes remain accessible.
"While uncertainties remain, the acute risk phase for the global economy should be over if tankers can begin moving again," said Michael Feroli, Head of U.S. Economics at JPMorgan.
"Still, not everything would return to its pre-conflict place - oil prices are likely to remain elevated for some time, as inventories get rebuilt and the supply infrastructure in the Middle East is repaired."
Oil Prices Climb on Supply Concerns
The latest military developments pushed energy prices higher as traders assessed the possibility of disruptions to global crude supplies.
Brent crude rose 2.1% to $93.02 per barrel, while U.S. West Texas Intermediate crude gained 2.6% to reach $89.61.
The renewed increase in oil prices has revived concerns about inflation, particularly as central banks continue monitoring the economic impact of elevated energy costs.
AI Boom Drives Asian Markets Higher
While geopolitical tensions dominated headlines, market performance continued to be shaped by enthusiasm surrounding artificial intelligence technologies.
Japan's benchmark stock market surged another 0.9% after gaining nearly 5% the previous week, pushing it further into record territory. South Korean stocks climbed 4.2% after an explosive 8% rally last week, while Taiwanese equities maintained their upward trajectory following gains of almost 6%.
The broader MSCI Asia-Pacific Index excluding Japan advanced 1.6%, reflecting strong regional momentum.
One of the biggest winners was Samsung Electronics, whose shares jumped nearly 10% on Monday. The rally extended gains recorded on Friday after the company announced it had begun shipping samples of its latest high-bandwidth memory (HBM) chips, a critical component in AI computing systems.
The scale of the AI-driven expansion was further highlighted by South Korea's latest trade figures. The country's exports surged at the fastest annual pace in more than 40 years during May, reaching a record $87.75 billion as global demand for technology products remained exceptionally strong.
Nvidia and Computex Take Center Stage
Investor attention is also focused on Taiwan, where Nvidia Chief Executive Officer Jensen Huang opened the annual Computex technology exhibition.
Huang is expected to provide updates on Nvidia's latest artificial intelligence initiatives, next-generation products, and the increasingly important role Taiwan plays within the global semiconductor supply chain.
His remarks could offer fresh clues about the future direction of the AI industry, which has become the dominant force driving global equity markets.
China Remains the Regional Outlier
Not all Asian markets participated equally in the rally.
Chinese blue-chip stocks slipped 0.2% as concerns about the country's economic recovery continued to weigh on investor sentiment.
A new survey released Monday showed factory activity stagnated during May, reinforcing worries that domestic demand remains weak despite government efforts to stimulate growth.
The disappointing data stands in sharp contrast to the robust expansion seen in other parts of Asia that have benefited more directly from the AI investment boom.
Investors Await Key U.S. Economic Data
Attention is now turning toward a critical week of economic releases in the United States.
Futures markets pointed to modest gains on Wall Street after both the S&P 500 and Nasdaq ended last week at record highs. S&P 500 futures rose 0.3%, while Nasdaq futures gained 0.5%.
However, analysts note that the market's advance remains heavily concentrated among a small group of technology giants.
The ten largest AI-linked companies now account for roughly 40% of the S&P 500's total value, while only 21 of the index's 500 constituent stocks recently reached record highs. During May, technology shares surged nearly 16%, significantly outperforming sectors such as healthcare and consumer discretionary stocks.
Investors will closely monitor comments from several Federal Reserve officials this week, alongside key economic indicators including the ISM Manufacturing Survey and Friday's highly anticipated employment report.
Economists expect the U.S. economy to have added approximately 85,000 jobs in May while the unemployment rate remains unchanged at 4.3%.
A stronger-than-expected reading could reinforce expectations that the Federal Reserve may need to raise interest rates again before year-end.
Dollar Holds Firm as Gold Struggles
The prospect of tighter monetary policy helped keep the U.S. dollar broadly stable against major currencies.
The Japanese yen remained under pressure, with the dollar trading at 159.45 yen, although investors remain cautious about the possibility of intervention from Japanese authorities should the currency weaken beyond the psychologically important 160 level.
The euro traded at $1.1645 after spending the previous week within a relatively narrow range.
Surprisingly, gold failed to attract significant safe-haven demand despite rising geopolitical tensions. The precious metal slipped 0.4% to $4,518 an ounce, suggesting investors remain more focused on growth opportunities in equities than on traditional defensive assets.
For now, the AI revolution continues to outweigh geopolitical anxiety in the minds of investors, though escalating tensions in the Gulf and persistently high oil prices could quickly test that confidence in the weeks ahead.