Asian stock markets largely saw gains on Monday, buoyed by a positive outlook following comments from US President Donald Trump about progress in talks aimed at resolving tensions with Iran. Japan’s Nikkei 225 index was the standout performer, rising 2.8%, and it was followed by solid advances in Australia’s S&P/ASX 200 and China’s Shanghai Composite. However, trading in South Korea and Hong Kong was paused due to public holidays, and US markets were closed in observance of Memorial Day.
The optimism among investors was fueled by reports indicating that the United States and Iran are edging closer to an agreement that could potentially end their conflict. Such a resolution would likely lead to the reopening of the Strait of Hormuz, a pivotal channel for global oil shipments. This waterway is crucial for countries like Japan, which depend heavily on oil transported through this route, and its reopening could allay fears of disruptions in global oil supplies.
As hopes for reduced geopolitical tensions rose, oil prices saw a sharp drop. US benchmark crude experienced a decline of over $5 per barrel, while Brent crude also witnessed a notable decrease. The currency markets responded in turn, with the US dollar slightly weakening against the Japanese yen and the euro making gains.
Analysts suggest that with the potential for a diplomatic breakthrough, investors are beginning to shift their attention from the risk of conflict to the prospects of enhanced global trade and energy stability. This shift in focus comes even as Wall Street ended the previous week on a high note, achieving its eighth consecutive weekly gain. Strong corporate earnings have bolstered investor confidence, despite ongoing concerns about inflation and elevated bond yields.
US Treasury yields remain higher than levels seen before the conflict, reflecting a lingering caution within financial markets. However, the overall sentiment appears to be improving as the possibility of easing tensions with Iran brings hopes for a more stable economic environment.
