Asian equities mostly fell on Friday as higher oil prices weighed on markets amid stalled US–Iran peace talks and disruption in the Strait of Hormuz. Japanese shares were mixed as traders reviewed inflation data ahead of next week’s Bank of Japan (BoJ) meeting.
Energy prices stayed elevated due to ongoing supply uncertainty, raising inflation and growth concerns. Many major Asian economies rely heavily on Middle East oil imports, increasing exposure to developments linked to Iran.
Asia Market Snapshot
At the time of writing, Hong Kong’s Hang Seng Index was down 0.2% near 25,860, South Korea’s KOSPI fell 0.93% to near 6,410, and China’s SSE Composite Index declined 0.58% toward 4,050. Japan’s Nikkei 225 was 0.61% higher near 59,500.
Japan’s annual inflation rose to 1.5% in March from 1.3% in February, a near four-year low. Core inflation increased to 1.8% year on year from 1.6%, staying below the BoJ’s 2% target for a second month.
Reports said the US military intercepted two Iranian oil supertankers allegedly trying to evade a blockade, while Tehran continued to threaten vessels in the Strait of Hormuz. In South Korea, technology shares weakened after Wall Street falls and profit-taking, while some defence-related stocks rose, including Hanwha Aerospace and Doosan Enerbility.
Looking back at the stalled US-Iran talks in 2025, we recall how those tensions created significant volatility in energy markets. We saw Brent crude futures surge past $110 a barrel in November 2025 before settling, which shows how quickly prices can react. This suggests that in the coming weeks, we should consider using long-dated call options on oil futures to hedge against any renewed supply disruptions.
Volatility Hedging Ideas
The risk-off sentiment described at the time spread rapidly, hitting most Asian markets and causing implied volatility to spike. We remember the CBOE Volatility Index (VIX) climbing above 30 in the fourth quarter of 2025, creating profitable opportunities for those who were prepared. Therefore, purchasing VIX call options or futures can serve as a cost-effective portfolio hedge against sudden market shocks.
While most of Asia struggled, Japan’s equities were an exception due to inflation remaining below the Bank of Japan’s target. The BoJ did in fact hold its policy steady through the end of 2025, only shifting its stance in early 2026 when core inflation finally stayed above 2% for a third straight month. This indicates a potential pair trade: buying Nikkei 225 futures while selling futures on the KOSPI to capitalize on this policy divergence.
The rotation into defense stocks in South Korea was a clear signal of market anxiety that proved to be a lasting trend. Hanwha Aerospace’s stock gained over 15% in the final quarter of 2025, even as the broader KOSPI index lagged behind. For traders, this means using call options on individual defense-related stocks could be a more precise way to profit from regional uncertainty than shorting a broad index.
Elevated energy prices historically pressure the currencies of major importers like Japan and South Korea. During the peak oil scare in late 2025, the Japanese yen weakened past 160 against the dollar, highlighting this vulnerability. We should therefore use currency options to hedge or speculate on further weakness in the yen or the Korean won if geopolitical tensions re-emerge.
