Asian markets traded mixed on Tuesday as investors tried to decipher conflicting messages about the US-Iran conflict, while Japanese and South Korean markets retreated from recent record highs.
Regional markets initially followed the positive sentiment on Wall Street, which hit new records on Monday thanks to the continued strength of semiconductor stocks.
However, this momentum began to fade early on Tuesday, with S&P 500 futures falling 0.4% in Asian trading.
At the same time, unclear signals on the Iran front weighed on investor sentiment, particularly after a report late Monday that Tehran had cut off communication with the United States through intermediaries.
On the other hand, US President Donald Trump insisted that talks are ongoing and expressed hope for a deal within the next week.
Oil declines
Oil prices dropped but retained most of the gains from the previous session, as markets remain skeptical about the progress of US-Iran negotiations aimed at a ceasefire.
The possibility of de-escalation between Israel and Lebanon offered some relief, but navigation problems in the Strait of Hormuz persist, with no immediate prospect of full reopening of the critical waterway.
Brent crude for August fell 0.9% to $94.13 a barrel, while US WTI crude dropped 1% to $91.19 a barrel.
Despite the correction, both contracts had risen more than 4% on Monday.
Japan and South Korea under pressure as semiconductor rally fades
Japan's Nikkei 225 and South Korea's KOSPI were the weakest indices in Asia, each falling about 2% from recent all-time highs.
The Nikkei closed down 0.5% at 66,617 points.
Semiconductor and technology stocks, which had driven most of the gains in recent months, weighed heaviest on both indices.
Specifically, semiconductor stocks saw profit-taking after the impressive May rally fueled by AI optimism.
Nvidia's unveiling of new AI products on Monday had further boosted the sector.
In South Korea, investors were also rattled by higher-than-expected consumer inflation data for May. Annual inflation hit a 26-month high, reinforcing expectations that the Bank of Korea will raise rates later this year.
Hong Kong: Tech keeps market on upward track
Hong Kong was an exception in the region, with the Hang Seng Index rising 0.8%, thanks to gains in several tech giants.
Among the key support was BYD, as the electric vehicle maker reported its first monthly sales increase in eight months. Its stock rose nearly 5%.
Tencent also surged nearly 8% after a Financial Times report that it plans to launch an integrated AI assistant in its WeChat app.
Mixed picture in other regional markets
Other Asian markets moved without a clear direction.
China's Shanghai Shenzhen CSI 300 edged up 0.7%, while the Shanghai Composite was marginally lower.
In Australia, the ASX 200 lost 0.5% after Ian Harper, a board member of the Reserve Bank of Australia, said persistently high inflation remains a serious problem for the economy. His comments reignited fears of further rate hikes from the central bank, which has already raised rates by 75 basis points since the start of the year.
Meanwhile, Singapore's Straits Times Index rose 0.6%, while India's Nifty 50 futures fell 0.8%, signaling further losses in the Indian market.
