Asian markets retreated Friday as traders shunned risk assets amid U.S. rate uncertainty and Iran geopolitical tensions. Most benchmarks declined, with Japan's Nikkei leading losses down 1.4%. South Korea stood apart as the KOSPI surged 1.6% to a record 5,768.61 points, defying regional weakness.

Regional weakness followed Wall Street's overnight decline. Chinese tech giants Alibaba and Baidu slumped 4-6% in Hong Kong after appearing on a U.S. government list of companies with alleged ties to the Chinese military. South Korea's gains came from brokerage, defense, and insurance stocks despite broader Asian selling.

Market sentiment soured after President Trump set a 10-15 day deadline for Iran to reach a nuclear deal or face U.S. action. Investors weighed mixed economic data from Japan, where inflation hit a near four-year low while factory activity reached a four-year high. The KOSPI's record close marked its second consecutive day of peaks.