Kospi jumps after US-Iran deal; tech rally lifts index

On Monday South Korea’s Kospi climbed about 5% to 8,570 KRW, its highest level since June 4, after a US-Iran agreement to reopen the Strait of Hormuz without charging tolls. The pact pushed crude and natural gas prices lower and encouraged risk-on flows across Asian markets. The 10-year Korean government bond yield declined to 4.117%.

Japan’s Nikkei 225 and Topix also posted gains as investors reacted to lower geopolitical risk for oil shipments through the Gulf. The agreement had been signalled in the days before Monday and reduced immediate concerns about supply disruptions. South Korea imports most of its oil from the Middle East and has drawn down strategic petroleum reserves in recent months.

Lower fuel prices coincided with a technology sector rally after last Friday’s SpaceX initial public offering. SpaceX raised more than $75 billion at an initial valuation above $1.7 trillion, and its shares rose about 19% on listing, briefly lifting its market value above $2 trillion. The IPO has increased expectations that other large technology firms will pursue listings later in the year.

Heavyweight tech-related stocks led the Kospi advance. Samsung gained about 5.3%, SK Hynix added roughly 6.8%, and SK Square rose about 7%. Their market capitalizations moved to roughly $1.32 trillion for Samsung, $963 billion for SK Hynix and $116 billion for SK Square; SK Square’s valuation is linked to its stake in SK Hynix.

Technical indicators showed the Kospi trading above an ascending trendline connecting lows since May 20 and above its 50- and 100-day exponential moving averages. The relative strength index moved above the neutral 50 level. Analysts identified 8,925, the index’s all-time high, as an initial upside target.

Market participants are looking ahead to a US interest rate announcement expected on Wednesday. Economists surveyed ahead of the meeting mostly expect the Federal Reserve to keep its policy rate in a 3.5%–3.75% range and to provide guidance on future moves. The Fed’s remarks are seen as a potential near-term influence on global risk assets and on currency and rate expectations.

The Strait of Hormuz handles a large share of seaborne oil flows from the Gulf. A reduction in the risk of transit disruptions typically lowers the premium embedded in crude and natural gas prices. For energy-importing economies such as South Korea, lower import costs can contribute to lower headline inflation and reduced cost pressure for industry and households.