Markets in Japan and South Korea staged a strong recovery following a sharp selloff triggered by an attack linked to Iran, as global risk sentiment improved amid reduced prospects for broader regional conflict. The Nikkei 225 and KOSPI 11 reversed earlier losses, while oil and volatility markets stabilized.
- Nikkei 225 rose 3.8% on March 5, reversing a 4.2% drop from March 4
- KOSPI 11 gained 3.1% after falling 4.5% the prior day
- Brent crude (CL=F) declined 5.3% to $78.40 per barrel
- VIX index fell from 32.1 to 24.7, signaling reduced market anxiety
- Geopolitical risk premium eased amid de-escalation signals
- Defense stocks saw small gains; energy firms faced volatility despite lower oil prices
Following a volatile start to the week, Japan’s Nikkei 225 reversed course to close 3.8% higher on March 5, 2026, after initial panic stemming from an attack attributed to Iran. The index had plunged 4.2% the previous day, reflecting heightened geopolitical anxiety. Similarly, South Korea’s KOSPI 11 gained 3.1%, recovering from a 4.5% decline on March 4, as investors reassessed the situation following de-escalation signals from regional diplomatic channels. The rebound was underpinned by a drop in crude oil prices, with Brent crude futures (CL=F) falling 5.3% to $78.40 per barrel, signaling reduced fears of supply disruptions. The VIX index, a gauge of market volatility, declined from a peak of 32.1 to 24.7, indicating a return to risk-on sentiment. These movements reflect a recalibration of risk pricing across Asian equity markets, which had been pressured by fears of wider conflict in the Middle East. The defense and energy sectors saw divergent reactions: defense-related stocks in both Japan and South Korea posted modest gains, while energy firms faced short-term headwinds despite lower oil prices. The shift underscores investor preference for stability over speculation, particularly in markets sensitive to global supply chains and regional tensions.