(Sharecast News) - Asia-Pacific markets rallied on Wednesday, tracking gains on Wall Street after oil prices dropped sharply and strong earnings lifted investor sentiment, while South Korea's Kospi hit another record.
"Risk appetite has reasserted itself after president Trump signalled 'great progress' toward a potential agreement with Iran and paused Operation Freedom, the US initiative supporting safe passage through the Strait of Hormuz," said Patrick Munnelly, market strategy partner at TickMill.
"The shift in tone was enough to add fuel to a rally already being driven by AI and technology optimism."
Sentiment improved after US president Donald Trump signalled that diplomatic efforts to resolve the Middle East crisis were progressing, saying the US bid to guide ships out of the Strait of Hormuz had been paused.
"We have mutually agreed that, while the Blockade will remain in full force and effect, Project Freedom will be paused for a short period of time to see whether or not the Agreement can be finalized and signed," Trump said in a Truth Social post.
US Defense Secretary Pete Hegseth said on Tuesday that "two US commercial ships, along with American destroyers, have already safely transited the strait, showing the lane is clear."
Oil prices extended their decline, with Brent crude futures last down 6.35% on ICE at $102.89 per barrel, and the NYMEX quote for West Texas Intermediate falling 7.03% to $95.08.
"Oil has given back some of its geopolitical premium, with Brent slipping around $2 per barrel from Tuesday's close to trade near $108 per barrel," Munnelly said.
"However, the move lower looks more like headline relief than a full repricing of supply risk. Safe passage for energy cargo through the Strait is still not functioning normally, and the US blockade remains in place for vessels travelling to or from Iranian ports."
Munnelly added that this "limits the scope for a deeper near-term fall in crude, particularly as inventory signals are tightening".
Seoul leads regional gains
Japanese markets were closed for Constitution Memorial Day.
In China, the Shanghai Composite rose 1.17% to 4,160.17, while the Shenzhen Component gained 2.33% to 15,459.62.
Montage Technology climbed 14.82%, Guangzhou Fangbang Electronics added 13.19%, and Jiangsu Jiangnan High Polymer Fiber rose 10.17%.
China's services sector expanded faster than expected in April, with the RatingDog services PMI rising to 52.6 from 52.1 in March, ahead of forecasts for 52.0.
New orders increased for a 40th consecutive month and at the fastest pace since February, supported by stronger domestic demand, new project launches and promotional activity.
New export business declined for a second straight month, although only marginally.
Cost pressures increased, with input prices rising at the fastest pace so far in 2026.
"Survey respondents widely linked higher costs to rising oil prices and fuel costs due to the impact of the war in the Middle East," the survey said.
The composite PMI rose to 53.1 from 51.5, marking the second-fastest expansion in overall activity since mid-2024.
Hong Kong's Hang Seng Index advanced 1.22% to 26,213.78.
Xinyi Glass Holdings rose 9.79%, China Overseas gained 7.01%, and China Resources Land added 6.7%.
South Korea's Kospi 100 surged 8.04% to 8,728.76, with SKC up 30%, Mirae Asset Daewoo Securities rising 19.2%, and Samsung C&T gaining 17.34%.
Consumer prices in the country rose 2.6% year on year in April, up from 2.2% in March and the steepest increase since July 2024, matching the median forecast in a Reuters poll.
The index rose 0.5% month on month after a 0.3% increase in March, as petroleum product prices jumped 7.9% over the month and international airfares surged 13.5%, according to the Ministry of Data and Statistics.
Markets rise in Australasia on fresh economic releases
Turning down under, Australia's S&P/ASX 200 rose 1.3% to 8,793.60.
Infratil jumped 14.95%, IGO gained 6.6%, and Liontown Resources added 6.28%.
Ai Group's Australian Industry Index rose 9.8 points in April but remained in contraction at -24.4.
The performance of manufacturing index edged up 0.7 points to -27.9, while the construction index improved 37.8 points to -19.3.
Business activity, employment and new orders all improved from March but remained negative, pointing to stabilisation rather than a clear recovery.
Input prices surged to 69.3, while sales prices rose much less to 23.1, signalling margin pressure as higher diesel, transport and wage costs remained difficult to pass on.
Across the Tasman Sea, New Zealand's S&P/NZX 50 gained 0.84% to 13,145.19.
Infratil rose 13.23%, Westpac Banking Corporation gained 4.4%, and Ryman Healthcare added 3.69%.
New Zealand's unemployment rate eased to 5.3% in the March quarter from 5.4% in the previous quarter, according to Stats NZ, as more jobs were added and more people left the labour force.
A total of 163,000 people were unemployed, down 2,000 from the previous quarter but 7,000 higher than a year earlier.
The reading was slightly better than most forecasts and close to the Reserve Bank of New Zealand's February projections.
Dollar slips against regional peers
In currencies, the dollar was last down 1.15% on the yen to trade at JPY 156.07, as it declined 1.05% against the Aussie to AUD 1.3776, and dropped 1.33% on the Kiwi to change hands at NZD 1.6762.
Reporting by Josh White for Sharecast.com.
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