Asian equities rose after a strong Wall Street rally and improved global sentiment. Japan’s Nikkei 225 rose 4.48% to about 53,350, Hong Kong’s Hang Seng Index gained over 2% to 25,300, China’s SSE Composite added 1.41% to 3,950, and South Korea’s Kospi climbed over 8% to nearly 5,460.
US President Donald Trump said the US would be “leaving very soon” from the Iran war, with a withdrawal possible within two to three weeks. He also said a formal agreement with Tehran was not required to end hostilities, while Iranian President Masoud Pezeshkian said Iran would de-escalate if certain guarantees are met.
Japan Tankan Signals Stronger Growth
Japan’s Tankan Large Manufacturing Index rose for a fourth straight quarter to 17 in Q1 2026, up from a revised 16. The reading exceeded expectations and supported the Bank of Japan’s plan for gradual rate rises.
In Hong Kong, gains were broad, led by property, financial and consumer shares. China’s RatingDog Manufacturing PMI eased to 50.8 in March from 52.1 in February, below the 51.6 forecast, alongside higher energy costs.
South Korea’s rally was supported by export data and earnings expectations. Exports rose 48.3% year on year to a record $86.1 billion in March, helped by semiconductor shipments.
Given the sharp reduction in geopolitical risk, we should expect volatility to continue falling in the coming weeks. The CBOE Volatility Index (VIX) has collapsed, dropping below 14 for the first time this year as tensions ease. This environment favors strategies that profit from stability, such as selling puts or implementing credit spreads on major indices.
Energy Markets React To Lower War Risk
The potential US withdrawal from Iran is a significant event for energy markets, directly impacting oil prices. Brent crude futures have already pulled back over 15% in the last week to trade near $78 a barrel, a stark contrast to the highs above $95 we saw in late 2025 during the peak of hostilities. We should consider buying puts on energy sector ETFs, as producers’ margins will likely face pressure.
South Korea’s outperformance, driven by record exports, presents a clear opportunity. The 48.3% jump in exports is heavily tied to semiconductors, and this aligns with recent data from the World Semiconductor Trade Statistics (WSTS) organization, which just upgraded its 2026 global market growth forecast to 18%. We believe buying call options on major South Korean technology exporters is the most direct way to ride this momentum.
In Japan, the strong Tankan survey data creates a headwind for the equity rally by strengthening the case for more Bank of Japan rate hikes. Market pricing now indicates a greater than 70% probability of another 25-basis-point hike by the June meeting. This suggests pairing long Nikkei positions with buying puts or using collars to protect against downside from a more aggressive central bank.
The divergence between the Hong Kong rally and weakening Chinese manufacturing data warrants caution. The PMI slip to 50.8 reflects the struggle many Chinese manufacturers faced with elevated energy prices throughout 2025, a hangover effect that is only now beginning to ease. Given this uncertainty, using straddles on the Hang Seng Index could be prudent to capitalize on a significant price move in either direction.
