When the US-Israel war against Iran erupted on February 28, Asian markets absorbed the shock with brutal efficiency. Energy prices spiked, supply chains fractured, and investors stampeded out of the region’s equities. In the weeks that followed, the MSCI Asia Pacific Index shed nearly 5% as the Strait of Hormuz closure cut off energy flows, commodity markets convulsed, and global fund managers reassessed the risk of holding emerging market assets tied to a region that suddenly sat at the economic crosshairs of a Middle East conflict.
Six weeks later, the picture looks meaningfully different. Asian markets are healing, and two markets in particular — Taiwan and Singapore — have led the recovery all the way back.
As of Tuesday, Taiwan and Singapore equities have fully erased their war-related declines. Mainland China is now less than 1% away from recovering its pre-war levels. Japan is within 2%. Australia and Hong Kong remain about 3% below where they stood before hostilities began. In currencies, the Australian dollar is close to reversing its drop against the greenback, while the yuan has strengthened. Taiwan’s benchmark index hit a fresh record high on Tuesday, powered by a broad rebound in chip stocks.
The Two Forces Behind the Recovery
The rally in Asian markets since the ceasefire agreement on April 7 reflects two overlapping developments, and it is important to understand both.
The first is the ceasefire itself. When the US and Iran agreed to a two-week suspension of hostilities, markets that had been pricing in a prolonged war quickly repriced toward a more optimistic scenario. The MSCI Asia Pacific Index jumped as much as 5.2% — its largest single-day gain in over a year — on the day ceasefire hopes solidified, with South Korea, Taiwan, and Japan leading the advance. Technology giants TSMC, Samsung Electronics, and SK Hynix provided the biggest boost to the gauge’s advance.
The second and arguably more durable force is the AI trade itself. Investors who pulled money from Asian equities in the heat of the conflict were always going to return to the structural story that had been driving the region’s markets since before the war began: the insatiable global demand for artificial intelligence infrastructure, and Asia’s unique position at the centre of its supply chain.
That story has only been reinforced during the war’s disruption. TSMC reported first-quarter 2026 revenue of NT$1.13 trillion ($35.6 billion) — a 35% year-on-year increase that beat analyst consensus and represented another record quarter. March revenue alone surged 45.2% year-on-year, with gross margins projected at 64%. The company’s full earnings are due April 16, and analysts broadly expect another beat. Samsung Electronics reported an eightfold surge in quarterly profit that exceeded market expectations. The results collectively validated one thing: even with a war disrupting global supply chains and energy markets, AI chip demand is not slowing down.
Taiwan: The Record That Says Everything
Taiwan’s benchmark index hitting a fresh all-time high on Tuesday is more than a market statistic. It is a signal that global investors believe the country’s semiconductor industry is structurally indispensable — important enough that even a six-week war in the Middle East, which created genuine supply chain vulnerabilities for the island, could not permanently dent confidence in its earnings power.
Taiwan imports 97% of its energy, with 37% of its power grid relying on Middle Eastern LNG. The country’s LNG reserves can last only about 11 days without foreign imports. The Hormuz closure cut off a meaningful portion of that supply. Helium prices doubled during the conflict — and helium, largely sourced from Qatar’s Ras Laffan facility, which took direct strike damage, is a critical input in advanced chip manufacturing. Both TSMC and SK Hynix noted these supply chain pressures while maintaining that they had not yet materially impacted their financial results.
What sustained investor confidence through this vulnerability was the combination of strong earnings results — which proved that production had continued despite the disruptions — and the ceasefire, which provided a path to normalising energy and material supply flows. Once that path appeared credible, institutional money returned quickly. Taiwan and South Korea attracted a combined $7.9 billion in net foreign inflows in the week following the ceasefire announcement, marking a dramatic reversal after more than a month of sustained outflows. While modest compared to the record $70 billion withdrawal seen in March, the speed of the return was telling.
Singapore: The Haven That Stayed Resilient
Singapore’s recovery story is a different type of narrative. Where Taiwan’s rebound is a tech story, Singapore’s is a stability story.
The Straits Times Index has been broadly unchanged since the start of the Iran war, compared with a 4.9% decline in the broader MSCI Asian gauge. Singapore effectively demonstrated why it has earned a reputation as Asia’s financial safe haven: its markets held their ground through a period when most regional peers were falling. The city-state is geographically removed from the Middle East conflict’s direct energy vulnerabilities, runs a current account surplus, holds substantial foreign exchange reserves, and benefits from its role as a major hub for wealth management, banking, and commodity trading — including, ironically, the oil trade that the conflict had disrupted.
The Monetary Authority of Singapore added a further boost at its Tuesday meeting, where analysts expected a tightening via currency appreciation against the basket of its main trading partners. A stronger Singapore dollar is a signal of policy credibility, and it tends to attract capital flows toward the city-state’s assets. Analysts at PineBridge Investments noted Singapore’s digital transformation, wealth inflows, and improving monetary conditions as factors underpinning a constructive outlook for its equities.
What’s Still at Risk
The recovery is real, but it is also fragile. The ceasefire is two weeks old and has already shown serious strain. The Islamabad peace talks collapsed over the weekend. The Strait of Hormuz remains only partially open, with Iran charging transit tolls and maintaining effective control over shipping through the waterway. The US Navy’s attempt to transit the strait on Saturday ended in confrontation with the IRGC. The ceasefire has not been replaced by a peace deal.
If conflict resumes — and the failed diplomatic talks suggest the gap between the two sides remains wide — Asian markets would be exposed again. Taiwan’s energy vulnerability is not theoretical. Japan, which relies on Middle Eastern LNG for a significant portion of its industrial energy, is within 2% of pre-war levels but still has not fully recovered. And while Australia and Hong Kong have reclaimed ground, they remain about 3% below pre-war levels.
The broader context is one of investors trying to balance two powerful forces: the structural AI demand that makes Asian technology equities genuinely attractive at almost any geopolitical noise level, and the existential supply chain risk that a sustained Hormuz closure could create for the very companies driving that demand.
For now, the AI trade is winning. Taiwan at a record high, Singapore near a record, Samsung profits eightfold above expectations, TSMC posting its eighth consecutive quarter of annual revenue growth — these are not the data points of an investment thesis in retreat. They are the data points of a thesis that survived a war scare and came out the other side looking remarkably intact.
Written by Shalin Soni, CMA specializing in financial analysis, global markets, and corporate strategy, with hands-on experience in financial planning and analytical decision-making.
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Source: Based on Bloomberg and publicly available information.