Two forces are pulling global markets in opposite directions right now. AI-fueled optimism is lifting Asian equities to fresh highs, while escalating friction in the Persian Gulf is pushing oil prices into triple-digit territory.

Japan’s Nikkei recently hit record highs, surging 2.7% in a single session and notching nearly 5% in weekly gains. South Korea and Taiwan posted weekly advances of up to 8% and 6%, respectively. The catalyst is straightforward: insatiable global demand for AI hardware, and the chips that power it.

The AI trade keeps accelerating

North Asia has become ground zero for the AI investment thesis. Japan, South Korea, and Taiwan collectively house the companies that design, fabricate, and package the advanced semiconductors that make large language models and AI data centers possible.

Analysts note a growing willingness among institutional investors to look past geopolitical noise in favor of the long-term AI narrative. Intermittent selloffs have occurred when tensions spike, but each dip has been met with buying pressure from funds that view any pullback in AI-adjacent names as a discount, not a warning sign.

Oil’s uncomfortable return above $100

Brent crude surpassed $100 per barrel in early May 2026, driven by escalating clashes between the US and Iran that have directly impacted Gulf shipping lanes. Brent reached peaks between $110 and $114 per barrel amid ongoing flare-ups, including drone strikes targeting UAE and Saudi infrastructure and US warnings about the safety of vessels transiting the region.

The Strait of Hormuz sits at the center of the concern. Roughly one-fifth of global oil flows pass through this narrow waterway. Drone incidents and exchanges of fire affecting Gulf shipping lanes have pushed risk premiums higher.

Two markets, two stories

The divergence between tech-heavy Asian indexes and energy markets tells a revealing story about where capital allocators see value right now. If Gulf tensions escalate to the point where the Strait of Hormuz faces a genuine blockade or sustained military operations, the knock-on effects would be severe enough to overwhelm even the strongest sector-specific tailwinds. One-fifth of global oil supply is not a rounding error.

Taiwan and South Korea are not just beneficiaries of AI demand. They sit in a region where geopolitical risk extends beyond the Middle East to include cross-strait tensions and North Korean provocations.

The fact that Japanese, Korean, and Taiwanese indexes are printing fresh highs while Brent trades above $100 suggests that investors view AI as a once-in-a-cycle opportunity. Whether that conviction proves justified depends on the pace of AI monetization and the trajectory of US-Iran tensions.