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On Thursday May 7, Trump posted on Truth Social that Iran would be bombed “at a much higher level” if it failed to agree a peace deal. He said Operation Epic Fury would only end if Iran gave “what has been agreed to, which is, perhaps, a big assumption.” Japan’s Nikkei 225 closed at 62,833.84, up 5.58%, its highest level in history. SoftBank gained roughly 16 percent. Ibiden jumped 22.43%. Sumco surged 19.74%. The market did not flinch. Asia is not pricing a war anymore. It is pricing what comes after one.
What Actually Happened on Thursday
Japanese markets had been closed for three days over Golden Week. When they reopened on Thursday, traders walked into a room where AMD had just beaten earnings by 9.6 percent and Palantir had posted its best quarter on record, where Iran and the US were reportedly close to a framework agreement, and where the MSCI All Country World Index had set a fresh all-time high in their absence. The resulting session was a catch-up trade with jet lag.
The Nikkei closed at 62,833.84, a 5.58 percent gain and the index’s largest single-day point gain on record, eclipsing the previous record set in August 2024, per Japan Today. The Topix rose 3 percent to 3,840.49. The move was not broad. It was specific. Ibiden, which manufactures the IC substrates inside every AMD processor package, gained 22.43 percent. Sumco, which produces silicon wafers for semiconductor fabs, surged 19.74 percent. Mitsui Kinzoku, which supplies copper foil for printed circuit boards and specialty alloys for chip production, gained 19 percent. Renesas Electronics rose approximately 13 percent. Tosoh, which supplies process gases to semiconductor fabs, added 11 percent. SoftBank led everything with a gain of roughly 16 percent, its best day since March 2020, driven by its AI exposure through Vision Fund and its OpenAI stake.
The logic was direct. AMD reported Q1 revenue guidance that implied accelerating AI chip demand. That demand flows upstream into Japan’s semiconductor supply chain before it ever reaches a data centre in Virginia. When AMD beats by this margin, Tokyo reprices the whole stack in a single session. Thursday confirmed that linkage as clearly as any session this year.
There was also a cross-asset signal worth paying attention to. Japanese government bonds rallied at the same time as equities: the 10-year JGB yield fell 1.5 basis points to 2.485 percent, and the 5-year eased to 1.870 percent. Bonds and equities going up together in the same session had not happened in Japan since November 13, 2024. That is not a rotation. That is relief buying across every asset class simultaneously, from investors who had been holding cash through the conflict and decided Thursday was the moment to put it to work.
The Rest of Asia, and What KOSPI Is Now Worth
The session was not a one-market story. KOSPI jumped 1.43 percent to close at 7,490.05, extending what Bloomberg confirmed on May 7 as South Korea’s equity market overtaking Canada to become the seventh-largest in the world by market capitalisation, at $4.59 trillion. That is not a throwaway figure. South Korea’s listed companies have seen their collective market cap surge 71 percent in 2026, per Bloomberg data, while Canada’s rose about 7 percent over the same period. Samsung Electronics crossed the $1 trillion valuation mark during the week and SK Hynix has more than doubled this year as HBM chip demand accelerated. Together they account for roughly 45 percent of KOSPI’s weighting, which means the index is, in practical terms, one of the most concentrated AI bets in global equity markets.
From its war-driven trough near 5,277 in late March, KOSPI has now run approximately 42 percent. April alone produced a 31 percent gain, the second-best monthly rise in the index’s history after January 1998 during the IMF bailout, per Benzinga citing MarketWatch and FactSet. Samsung Engineering surged 21.51 percent in Thursday’s session. Hankook Tire gained 8.74 percent. SKC added 8 percent. South Korea’s semiconductor exports in April hit $31.9 billion, up 173 percent from a year earlier, maintaining the level following March’s $32.8 billion, per the Korea Exchange.
The Hang Seng rose 1.57 percent to 26,626.28, led by Techtronic Industries up 10.31 percent, Kuaishou Technology up 7.56 percent, and Chow Tai Fook Jewellery up 7.29 percent. The CSI 300 edged 0.48 percent higher to 4,900.51, as China’s export machine continued running at record pace despite the domestic cost pressures building underneath it. Australia’s ASX 200 rose 0.96 percent to 8,878.1. India’s Nifty 50 was flat to slightly lower.
Oil did not cooperate with the equity narrative. WTI futures for June were 0.92 percent higher at $95.95 per barrel as of the Asian close, per CNBC, moving in the opposite direction to what a ceasefire trade would suggest. The market was simultaneously buying equities on peace hopes and buying oil because those same peace hopes were not confirmed. Both trades were live at the same time, which tells you exactly how much uncertainty is still priced into this situation despite the headline index levels.
The BoJ Problem Nobody Wants to Talk About
There is a structural tension building under Japan’s equity rally that Thursday’s session accelerated rather than resolved. The Bank of Japan held its rate at 0.75 percent at both the March and April meetings, but the April vote was 6-3, with Hajime Takata, Naoki Tamura, and Junko Nakagawa all dissenting in favour of a hike to 1.0 percent. The BoJ raised its FY2026 core inflation forecast to 2.8 percent from 1.9 percent, citing higher crude oil prices from the Iran conflict. It simultaneously cut its FY2026 growth forecast to 0.5 percent from 1.0 percent. That combination, higher inflation and lower growth, is not a comfortable place from which to justify rate cuts, but it is also not an obvious argument for aggressive tightening when your export sector is finally pricing recovery.
Minutes from the March meeting released Thursday showed that many board members backed further hikes if Middle East-driven energy costs stayed elevated. With crude softening on Iran deal expectations, that trigger has weakened, and the specific signal to watch at the May meeting is whether “many members” backing rate hikes on energy grounds shifts to “some members,” which would indicate the tightening timeline is being pushed toward October rather than June. That matters for the equity market because a June BoJ hike would strengthen the yen, which would weaken the export earnings that are currently driving Nikkei valuations. The index’s semiconductor supply chain constituents earn in dollars and report in yen. A stronger yen compresses those earnings in local currency terms. The dynamic mirrors what the Reserve Bank of Australia navigated in May, where a central bank found itself forced to tighten on imported energy inflation rather than domestic demand. Thursday’s bond and equity rally was partly a bet that Iran deal progress removes the BoJ’s strongest argument for moving in June. The market played both sides of that trade in one session.
Why the Market Is Ignoring the President
Trump’s Truth Social post threatening to bomb Iran “at a much higher level” landed in the middle of the Asian session and moved nothing. That is worth sitting with. Three months ago, a Trump post about Iran during Asian trading hours would have sent Nikkei futures down two percent and Brent up five. On Thursday it moved neither. The market has learned to read the gap between Trump’s social media and US military action as wider than it initially assumed, and it is now pricing the most likely outcome rather than the most dramatic one.
Ohsung Kwon, chief equity strategist at Wells Fargo, told CNBC during the week: “I think the economy is going to be fine for the next three months.” That three-month horizon is doing a lot of work in Asia right now. Investors are not building positions for 2027. They are positioning for a world in which the Iran deal closes, Hormuz reopens, oil falls back toward $80-90, the BoJ stays on hold through summer, and AI chip demand continues compounding at the pace AMD and Palantir confirmed in their Q1 results. That sequence of events is not guaranteed. The prediction markets that called this conflict before the first missile landed are now pricing ceasefire probability above 70 percent for the next 30 days, but the May 4 drone strikes on Fujairah showed how quickly that can reverse. It is now the base case that Asian equity markets are running with, and until something materially breaks it, the Nikkei above 62,800 and the KOSPI at 7,490 are the numbers the market has decided to defend.
The irony is that the commodity supercycle that is simultaneously inflating Asian input costs is also inflating the revenue of the semiconductor and basic materials firms driving these indices higher. Japan’s mining and materials stocks, its chip substrate makers, its process gas suppliers: all are beneficiaries of the same supply chain disruption that is raising costs for Japanese manufacturers downstream. The war has sorted the Nikkei into winners and losers within its own index, and on Thursday the winners showed up to trade.
