Korea Leads Rebound in Asian Stocks, Dollar Gains: Markets Wrap

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(Bloomberg) — Asian equities rebounded, with South Korea leading gains after its worst rout on record, as markets regained some composure following a surge in volatility sparked by the Middle East conflict.

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South Korea’s Kospi Index surged 10% to lift the broader MSCI Asia Pacific Index 2.7%, the first increase in four sessions. The rally tracked Wall Street’s gains on Wednesday after stronger economic data soothed inflation concerns. The advance appeared tentative, with equity-index futures for the US and Europe edging lower, while the dollar — reasserting its role as a haven in times of crisis — strengthened.

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Chinese shares also traded higher even as the country set its 2026 gross domestic product target at 4.5% to 5%, the lowest growth objective since 1991. China also set its 2026 CPI target at about 2%.

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While sentiment in equities market rebounded, crude oil continued its advance. Gold and silver extended their gains amid concerns the conflict could be drawn out. Treasuries were also a touch weaker, with the yield on the 10-year rising by two basis points to 4.11%. 

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“I think that market participants are looking and trying to say, ‘How is this going to play out? What’s the end game?’” David Solomon, Goldman Sachs Group Inc. chief executive officer, said in an interview on Bloomberg TV. “As they have more information in the coming days, the coming week or two, I think that will have an impact on risk premiums.”

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Support from US stocks offered Asian traders a partial reprieve from Wednesday’s broad regional declines, as investors continued to assess the war’s impact on growth and inflation. For the rebound to be sustained, investors will likely need greater clarity on the duration of the conflict and the extent to which it will fan inflation.

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Uncertainty about how long the conflict could last is forcing investors to look to recent history as a guide for markets. Many are revisiting trades enacted after Russia’s 2022 invasion of Ukraine, betting that this week’s spike in energy prices will stoke inflation, sparking lasting strength in the dollar as well as weakness in bonds and stocks.

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“Whether or not the ‘feel good’ sentiment of today can last depends on what headlines we get out of the Middle East over coming days,” said Tim Waterer, chief market analyst at KCM Trade. “Market sentiment can shift on a dime depending on whether escalation or de-escalation seems the more likely path at any given point.”

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Traders remained focused on oil as the spike in prices following the Iran war threatened to accelerate inflation. Crude climbed as traders assessed the widening fallout from the US-Israeli war against Iran, with the combatants vowing to press on with the conflict that’s upending energy markets.

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West Texas Intermediate climbed above $77 a barrel, after spiking about 11% in the first three days of the week, while Brent traded close to $84.