Stocks in Tokyo took a direct hit on Wednesday as Iran sent a dozen or so ballistic missiles in the general direction of U.S. troops. The Nikkei 225 (down 1.6%) and the broader Topix (down 1.4%) both sold off significantly.
But for the rest of Asia, the bombs seemed to have a calming effect. Actually, it is the war of words that may be coming to an end.
That war involves missives on Twitter. The words of the Iranian foreign minister, Mohammad Javad Zarif, have reassured the majority of investors in Asia.
"We do not seek escalation or war, but will defend ourselves against any aggression," the minister tweeted.
"All is well," U.S. President Donald Trump said on his part, although the damage and casualty assessment was still going on at the time. "So far, so good!"
Why are Japanese stocks so out of kilter with the rest of the region? It's because Japan is one of the biggest importers of oil in the world, because Japan's yen is strengthening as a safe haven, and because big Japanese exporters therefore are taking a double tap of cost and currency hits.
A rise of ¥1 versus the U.S. dollar normally translates into about a 2% drop in Japanese stocks. The yen has gone from just under ¥110 on Dec. 26 to as low as ¥108 on Jan. 3, although it's now at ¥108.48.
Oil prices in Tokyo trade rose to their highest level in more than seven months.
While persistent high oil prices and a higher yen eventually will feed through to the bottom line of these companies, their shares could reverse their downward direction swiftly if these pressures ease.
Compare the course of Japanese stocks with shares in Singapore. The Straits Times index was down as much as 1.7% during Wednesday trading, then regained almost all that ground, ending down just 0.1%.
It was the same story Down Under. Australian shares fell as much as 1.1% but had barely budged by the end of trade. They closed down 0.1%.
Chinese shares fell, with the CSI 300 closing down 1.1%, but they have been on a rip as the two sides in the China-U.S. trade war prepare to sign a Phase One trade deal on Jan. 15. However preliminary and narrow that deal ends up being, it's a start. Since the deal started coalescing, Chinese stocks are up 7.4% even after Wednesday.
Hong Kong shares likewise lost 0.8% on Wednesday, but they still are showing gains of 7.8% since the end of November. They have the added boost that district council elections went off smoothly on Nov. 24 and ended with a big pro-democracy win.
So Chinese and Hong Kong stocks won't stay down for long. That's unless there's a hitch getting this trade war slightly sorted this time next week.
Thai stocks suffered the most in Southeast Asia. The benchmark SETI index dropped 1.6%. But in an even more dramatic way than Japan, Thailand is contending with an exceptionally strong currency.
After strengthening from 33 THB to below 30 to the U.S. dollar last year, the baht is at its strongest level since April 2013. The Bank of Thailand, the country's central bank, is trying to talk down the currency, which also makes the Thai economic mainstay of tourism more expensive. It will likely try to defend that 30 THB level, perhaps with an interest rate cut.
Japan's currency is really only strengthening while investors fret about the global political picture. The baht has better reasons for strengthening because Thailand has a sizable current-account surplus and a decent stock of foreign reserves. So the baht's strength may be the only longer-term issue to contend with if the war with Iran, real or verbal, ratchets down.