Asian stocks rally on tech recovery; oil eases despite Iran tensions

Asian stock markets rebounded sharply on Tuesday, with technology shares leading the charge after weeks of losses tied to concerns about excessive artificial intelligence valuations. Tokyo's index rose more than 3%, Seoul climbed 3.6%, and Shanghai gained nearly 2%, mirroring a Monday advance on the US Nasdaq that saw chipmakers recover from severe declines. Europe posted more modest early gains, with Frankfurt up 0.2% and Paris up 0.1%, while London fell 0.1%.

Yet beneath the surface, conviction remains weak. Stephen Innes of SPI Asset Management cautioned that the tech rebound does not appear to be driven by "a decisive improvement in the AI fundamentals." Instead, he highlighted what markets now demand: "Big Tech earnings now need to prove that AI revenues, margins and cash flow can justify the scale" of the enormous infrastructure investments companies have made. Earnings season opens in the coming days with Tesla and Alphabet, followed by Microsoft, Meta, Apple, and Amazon the following week—reports that will reveal whether firms can back up their spending with tangible returns.

Oil prices eased slightly despite escalating military tensions in the Middle East. Fresh fighting over the weekend prompted President Donald Trump to say Iran would pay "many times over" for the deaths of three additional American soldiers. The US launched a new round of attacks late Monday aimed at degrading Iranian military capabilities used against commercial shipping in the Strait of Hormuz. Hours later, the Iranian army claimed it had targeted US assets in Kuwait and Bahrain, including air defence systems, radar installations, and administrative buildings. Iran's Yemeni allies, the Houthi rebels, also vowed Monday to blockade Saudi ports, threatening Riyadh's ability to circumvent the Strait for some oil exports. Michael Wan of MUFG assessed that market disruptions are unlikely to be sustained, given the Houthis' current lack of capability to identify and selectively target Saudi-linked vessels. "All-in from a market perspective we think it's still a reasonable base case that there is resolution in the conflict, even if things may get worse before it gets better," Wan said.

Meanwhile, President Trump signed orders imposing new 50-percent tariffs on many Canadian goods, alleging "discriminatory treatment" of American alcohol, automobile, and dairy products. In Britain, new Prime Minister Andy Burnham, facing stretched public finances, announced plans to remove tax on household electricity bills, signaling fiscal pressures across major economies.

The Asian stock rebound reflects a fragile confidence in the technology sector after weeks of sharp losses driven by valuation concerns. The recovery mirrors Monday's Nasdaq advance, suggesting traders briefly stepped back from their pessimism about artificial intelligence spending. However, Stephen Innes of SPI Asset Management warned that the bounce is not grounded in any "decisive improvement in the AI fundamentals," underscoring how dependent the rebound is on sentiment rather than concrete business improvements.

The critical test arrives this week with major tech earnings announcements. Big Tech firms must now demonstrate that the vast sums they have invested in AI infrastructure will translate into sustainable revenues, profit margins, and cash flow. Until these companies show tangible returns from their AI bets, markets will likely remain volatile. The timing is significant: if earnings disappoint, the recent rebound could quickly reverse into fresh selling pressure.