(Bloomberg) — A rally in shares tied to artificial intelligence helped Asia’s stock benchmark wipe out losses sparked by the Iran war and climb back to an all-time high.

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The MSCI Asia Pacific Index jumped as much as 2.3% on Monday, the most since April 8, before paring some gains. Tech-heavy benchmarks in South Korea and Taiwan surged more than 4.5% each. The moves came after the S&P 500 Index extended a record-breaking streak Friday to mark a fifth week of gains, following solid earnings from tech mega caps.

The AI theme — a dominant feature of markets before the outbreak of the Middle East conflict — has returned to the forefront as last month’s ceasefire agreement between the US and Iran calmed investor nerves. Asia’s benchmark surged more than 13% in April, erasing almost all of the declines suffered in March. It is up 15% so far this year.

“Investors are moving past the initial shock from the Middle East tensions, with more joining the FOMO trade,” said Francis Tan, Asia chief strategist at Indosuez Wealth in Singapore.

President Donald Trump said over the weekend that the US will begin guiding out some neutral ships trapped in the Persian Gulf starting Monday. That’s after announcing he was sticking with a naval blockade of Iranian ports, adding to concerns that the vital Strait of Hormuz could remain effectively shut for a while.

Asia has emerged as a key pillar of the AI boom, pairing its dominance in semiconductor manufacturing with rapidly expanding data infrastructure. At the heart of it are three companies that provide essential hardware for AI: Taiwan Semiconductor Manufacturing Co., the world’s largest chip foundry, and South Korea’s leading memory makers Samsung Electronics Co. and SK Hynix Inc.

Shares of SK Hynix soared nearly 13% on Monday to a record, while TSMC’s jumped 6.6% to their all-time high. Samsung’s stock also jumped more than 5% to a record. Markets in mainland China and Japan were among those shut for holidays.

The AI-led surge is masking underlying strains in the broader Asian market, while creating a significant divergence in performance across the region’s equities. While North Asian markets like Korea and Taiwan are riding the rally, South and Southeast Asian peers such as energy-reliant India, Indonesia and the Philippines have lagged amid concern that the war-led spike in oil prices will fuel inflation and weigh on external balances.

Markets like South Korea are currently performing well because of this AI-driven trade or hype, Dilin Wu, a research strategist at Pepperstone Group, said in a Bloomberg TV interview. “I would be cautiously optimistic on the Asian market in general,” as the geopolitical uncertainty and high oil prices may be a constraint to equities, she said.

Sectors to Watch

  • Chinese property developers jumped in Hong Kong on optimism that home sales are recovering on the back of local government incentives.

  • Shares of Henderson Land and Link REIT gain as much as 6% and 2.7%, respectively, after Morgan Stanley upgrades them to overweight from equal-weight on Hong Kong’s property market recovery broadening beyond the residential sector.

  • South Korean stocks related to the EV battery supply chain advance, with analysts pointing to improving EV demand, potential lithium price hikes and earnings outlook.

  • China’s electric vehicle makers rise after reporting robust wholesales data in April thanks to resilient overseas demand. BYD’s domestic and export volumes topped consensus projections, according to analysts.

Markets at a Glance

  • MSCI Asia Pacific Index rose 2%

  • Hong Kong’s Hang Seng Index rose 1.2%; Hong Kong’s Hang Seng China Enterprises Index rose 1.1%

  • Taiwan’s Taiex Index rose 4.6%

  • South Korea’s Kospi Index rose 5.1%; South Korea’s Kospi 200 Index rose 5.8%

  • Australia’s S&P/ASX 200 Index fell 0.4%; New Zealand’s S&P/NZX 50 Gross Index rose 0.4%

  • India’s NSE Nifty 50 Index rose 0.3%

  • Singapore’s Straits Times Index rose 0.3%; Malaysia’s KLCI Index rose 1%; Philippines’ PSEi Index rose 1.9%; Indonesia’s JCI Index was little changed; Vietnam’s VN Index was little changed

  • Cboe Volatility Index rose 0.60 points

  • Bloomberg Dollar Index was little changed

  • West Texas Intermediate crude rose 1.5% to $103 a barrel

  • Euro was little changed

Here Are the Most Notable Movers

  • Samsung Securities shares closed 28% higher on Korea Exchange after Yonhap reported the brokerage has entered a partnership with Interactive Brokers to enable overseas investors to trade Korean stocks.

  • Shares of Adani group companies advanced as Indian Prime Minister Narendra Modi’s party led its rivals in early vote counts in West Bengal, on track to win its first-ever victory in the key state.

  • Australian supermarket chain Coles Group Ltd. said the price of some groceries is certain to climb as the company and its suppliers grapple with soaring fuel costs.

  • Prada’s shares rose as much as 8% in Hong Kong on Monday before paring gains, as analysts viewed the stock’s valuation as depressed and highlighted the management’s constructive outlook, which pointed to improving trends in recent weeks.

  • Shares of MiniMax jumps after Goldman upgrades the stock to buy from neutral, citing stronger revenue prospects driven by an expected new model launch, and recommends investors buy the latest pullback.

  • MediaTek shares soar to a record in Taipei trading after the chipmaker posted first-quarter net income that beat the average analyst estimate, with its AI ASIC revenue guidance lifting optimism.

  • National Australia Bank shares drop as much as 4% to the lowest since Aug. 13, after the Australian lender reported cash profit for the first half-year that missed the average analyst estimate.

Notes From the Sell-Side

  • US corporate earnings have proved resilient against the widely feared impact of the Middle East conflict, according to Morgan Stanley strategists, who say hyperscalers and semiconductor firms have been major contributors to the broad-based earnings strength.

  • US companies have so far reported “exceptionally strong” 1Q earnings with 63% of S&P 500 stocks having already reported, and guidance remains strong, according to Goldman Sachs strategists.

Related Market News

  • Taking Stock: The list of Asian stocks that benefit from business partnership with Nvidia Corp. is getting longer, as the region further integrates into the AI chip giant’s business ecosystem.

  • Inside Asia: South Korea’s won led most Asian currencies higher after a central bank official said it’s time to consider raising interest rates. The currency was also boosted by a rally in local shares to a record high.

  • Global Wrap: US equity futures pointed to further gains after Asian shares hit a fresh record on optimism around the artificial intelligence trade and stronger-than-expected earnings from megacap tech companies. The yen briefly spiked higher as traders remained on edge over possible intervention by the Bank of Japan.

This story was produced with the assistance of Bloomberg Automation.

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