The country's benchmark KOSPI rose 2.7 percent to close at 5,967.8 after briefly breaking above the 6,000 level in early morning trade. The index repeatedly hovered around the threshold throughout the session but failed to sustain its gains, losing momentum to finish below the psychologically important level.
Elsewhere in Asia, markets also closed higher in line with the improved global sentiment. Japan's Nikkei 225 rose 2.4 percent to 57,877.4, while China's Shanghai Composite gained 0.7 percent to 4,016.7. Hong Kong’s Hang Seng Index advanced 0.7 percent to 25,827.9.
Investor sentiment was supported by signs of continued talks between Washington and Tehran. While the first set of negotiation over Iran's uranium enrichment program remain unresolved, disagreemtns between the two sides appeared to narrow, with the U.S. proposing a 20-year suspension and Iran countering with a five-year halt.
Oil prices declined despite heightened supply risks. Brent crude fell 1.2 percent to US$98.19 a barrel and West Texas Intermediate dropped 3 percent to $96.1, even as U.S. naval forces enforced a blockade in the Strait of Hormuz, forcing at least two China-bound oil tankers to turn back. The divergence suggests markets are pricing in a contained conflict scenario rather than an immediate supply disruption.
Volatility indicators also pointed to stabilizing risk conditions. The Volatility Index (VIX) edged down 0.6 percent to 19.12, while the dollar index slipped 0.2 percent to 98.2. The Philadelphia Semiconductor Index (SOX) rose 1.7 percent, reinforcing strength in technology shares globally.
Institutional and foreign investors drove the rally on the KOSPI, buying a combined 2.08 trillion won ($1.41 billion) worth of shares, while retail investors sold 2.39 trillion won, suggesting profit-taking into strength and contributing to the late-session fade.
Among large-cap stocks, Samsung Electronics rose 2.7 percent to 206,500 won, while SK hynix surged 6.1 percent to 1,103,000 won, extending gains on expectations for strong earnings and continued AI-driven demand. Hyundai Motor gained 2.7 percent to 491,500 won, and Kia rose 1.2 percent to 149,200 won.
In contrast, battery and defensive shares lagged. LG Energy Solution fell 0.4 percent to 400,000 won, while Samsung Biologics and Hanwha Aerospace declined 0.9 percent to 1,536,000 won and 0.5 percent to 1,523,000 won, respectively.
The junior KOSDAQ rose 2.0 percent to 1,121.9, though gains were driven primarily by retail investors, who bought 116.5 billion won, while institutions and foreigners were heavy sellers, offloading 128.9 billion won and 6.7 billion won, respectively, suggesting a more speculative tone.
The Korean won strengthened modestly to 1,478.9 per dollar.
Overnight, U.S. equities closed higher, with the Dow Jones Industrial Average rising 0.6 percent, the S&P 500 gaining 1.0 percent and the Nasdaq advancing 1.2 percent, as markets continued to price in the possibility of further diplomatic progress despite the absence of a formal agreement.
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