South Korean stocks closed sharply higher on Tuesday, rising more than 2.7% to set a new all-time high. The market fully recovered all losses incurred since the Middle East conflict, as news of renewed U.S.-Iran negotiations boosted investor confidence.

The Korea Composite Stock Price Index (KOSPI) climbed 2.72% to finish at 6,388.47 points, surpassing the previous record of 6,307.27 points set on February 26, before the outbreak of Middle East tensions.

Since the conflict involving Iran began, the South Korean stock market has experienced significant volatility, with daily declines reaching as much as 12% and gains as high as 9%.

In March, impacted by the Middle East crisis exacerbating high inflation and economic slowdown, South Korean stocks fell more than 19%, ranking among the worst-performing global markets.

According to market analysts, this new milestone was reached as investors became less sensitive to Middle East developments and pinned their hopes on progress in U.S.-Iran peace talks, coupled with renewed optimism toward major South Korean chipmakers.

A similar trend was observed among foreign investors. After recording a net sell-off of 35 trillion won (approximately $238 billion) in South Korean stocks last month—a historic high—they have now returned to the market.

Samsung Electronics, South Korea's highest-valued tech firm, reported record first-quarter earnings, with operating profit exceeding 50 trillion won. This performance was largely driven by surging chip demand fueled by the rapid growth of artificial intelligence (AI).

Market observers also anticipate that SK Hynix will post better-than-expected first-quarter results, supported by strong sales of its high-bandwidth memory (HBM) for AI applications and tight supply conditions for DRAM chips.

Further gains for the KOSPI may be supported by the South Korean government's initiatives aimed at improving shareholder returns and reforming the capital market, analysts noted.