Asian equities turned lower on Friday as renewed Middle East tensions overshadowed early gains, with Japanese chip and AI-related stocks weighing on the Nikkei and Korean shares reversing a strong opening session.

The Nikkei fell around 1% as losses in technology names outpaced broader market strength, while the Topix, which is less exposed to the AI trade, was roughly flat on the day. The divergence suggests investors were selectively unwinding positions in high-flying AI and semiconductor names, sectors that have driven much of the region's equity gains over the past year.

SoftBank Group was among the session's notable decliners, dropping around 4% even after the technology investor posted a smaller-than-expected profit decline of around 18% for the first quarter a day earlier. Despite beating market consensus, the results were seen as offering little to lift the shares further, with one market participant noting the numbers failed to provide fresh cues that could support the stock price beyond the initial earnings reaction.

In South Korea, the KOSPI opened firmly higher, up more than 1% and briefly touching the region of the 6,400 level, extending gains even after a weak overnight session on Wall Street. That strength faded roughly an hour into trading, however, as geopolitical risk in the Middle East resurfaced.

Reports that Iran may move to restrict US and Israeli vessels from transiting the Strait of Hormuz, followed by news that Houthi rebels in Yemen had struck southern Saudi Arabia, weighed heavily on sentiment and sent the index into decline. The Strait of Hormuz is one of the world's most critical energy chokepoints, handling roughly a fifth of global oil consumption, making any threat to passage there a direct catalyst for energy prices and inflation expectations.

Chipmakers bore the brunt of the reversal, with SK Hynix falling by around 5% and Samsung Electronics also slipping, albeit by a smaller margin. The KOSDAQ mirrored the broader retreat, giving back its early strength to trade around 778, down close to 3% on the day.

The synchronised pullback across Korean equities underscored how quickly renewed Gulf security concerns can offset otherwise constructive market conditions, even after a session that had opened with clear upward momentum.

The reversal in Korean equities, from an early rally back to sizeable losses, highlights how sensitive regional risk appetite remains to any fresh Middle East headline, in this case reports of a potential Hormuz shipping restriction alongside renewed Houthi activity against Saudi Arabia. That combination is likely to keep a bid under oil and the dollar while weighing on risk-sensitive Asian currencies, including the Australian dollar given its correlation with regional equity sentiment.

In Japan, the divergence between a resilient Topix and a weaker Nikkei points to rotation out of AI and chip-linked names rather than a broad-based selloff, while SoftBank's decline despite beating profit expectations shows investors are looking past headline earnings for a clearer growth signal. Chipmakers across the region, including SK Hynix, remain exposed to both the AI trade unwind and any escalation in Gulf tensions that further pressures global risk sentiment.

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