Major stock markets across Asia traded mostly lower during the afternoon session on May 12, as President Donald Trump’s declaration that the US-Iran ceasefire was “on massive life support” kept geopolitical anxiety elevated and dampened risk appetite across the region. Traders were simultaneously positioning ahead of Trump’s upcoming visit to China and digesting hawkish signals from the Bank of Japan.
How did individual Asian markets perform?
South Korea’s Kospi Composite was the sharpest decliner among major Asian indices, falling 3.34% — the most significant single-day drop in the region on May 12. The outsized move in the Kospi reflects South Korea’s particular sensitivity to both geopolitical risk in the broader Asia-Pacific region and its heavy concentration in technology and semiconductor stocks, which have been under global pressure from AI disruption concerns following OpenAI’s enterprise deployment announcement.
In mainland China, the Shanghai Composite dipped 0.45% while the Shenzhen Composite — which is more heavily weighted toward technology and growth stocks — lost 1.13%, reflecting a cautious market mood ahead of Trump’s China visit. Traders are keeping expectations low for the Beijing trip, with the consensus view that a win would mean no new tariffs or export controls rather than any meaningful breakthrough on trade or the Iran situation.
Australia’s S&P/ASX 200 decreased 0.42%, tracking the regional risk-off mood and elevated crude oil prices that weigh on Australia’s import-dependent consumer economy even as they benefit the country’s significant energy export sector.
In contrast, Japan’s Nikkei 225 bucked the regional trend, rising 0.37% — supported by a weaker yen that boosts the competitiveness of Japan’s export-heavy corporate sector. Hong Kong’s Hang Seng added a marginal 0.14%, eking out a small gain amid the broader regional weakness.
What is driving the risk-off mood?
The primary driver of Asian market sentiment on May 12 is Trump’s declaration that the US-Iran ceasefire was “on massive life support” — language that crushed near-term hopes of a diplomatic resolution to the Middle East conflict that has kept the Strait of Hormuz under effective constraint and pushed Brent crude above $105 per barrel. The prolonged energy supply disruption continues to weigh on Asia’s oil-importing economies, with South Korea, Japan, China, and India all significantly exposed to elevated crude costs.
Bank of Japan rate signals
An important secondary driver for Asian markets — particularly the yen and Japanese assets — was the release of a summary of opinions from the Bank of Japan’s April meeting, which showed board members signalling support for raising interest rates. Japan’s 10-year government bond yield rose to a 29-year high of 2.54% ahead of a bond auction, reflecting the market’s growing belief that the BoJ is on a tightening path despite global uncertainty.
The hawkish BoJ signals kept the yen under pressure against the dollar in one direction — through the safe-haven dollar demand from geopolitical risk — while simultaneously raising the prospect of yen strength over the medium term if rate hikes materialise. The US dollar traded 0.26% higher against the yen at ¥157.63 at the time of reporting.
The Trump China visit
Asian traders are watching Trump’s upcoming China visit with cautious expectations. Analysts have broadly guided that the visit is unlikely to produce sweeping agreements, with the most optimistic scenario being no new tariffs or export controls and perhaps small symbolic deals in areas like agricultural purchases, aircraft orders, or signals on rare earths. For Asian markets that are deeply integrated into US-China trade supply chains — particularly South Korea, Taiwan, and Japan — the status quo holding without escalation is the base case and the market’s primary hope.
India angle
The Asian market weakness feeds directly into Indian market sentiment on May 12, where the Sensex and Nifty are themselves trading lower by over 1% amid the same combination of crude oil fears, Iran ceasefire uncertainty, and global risk-off positioning. India’s rupee hit a fresh all-time low of 95.58 against the dollar on the same session, reflecting the broader emerging market pressure from dollar strength and elevated energy import costs that is also weighing on regional currency markets across Asia.
Disclaimer: This article is for informational purposes only and does not constitute investment advice. Investors are advised to consult a registered financial advisor before making any investment decisions. Business Upturn does not hold any position in the securities mentioned.