Asian stock markets largely advanced on Monday, buoyed by news of progress in negotiations between the United States and Iran aimed at ending their conflict. This optimism coincided with a sharp decline in oil prices. Japan’s Nikkei 225 index led the regional gains with a 2.8% surge, while Australia’s S&P/ASX 200 and China’s Shanghai Composite also recorded notable increases. However, markets in South Korea and Hong Kong remained closed due to public holidays, and the US markets were shut in observance of Memorial Day.
The positive investor sentiment was fueled by reports suggesting that the US and Iran were nearing a potential agreement that could resolve their conflict and lead to the reopening of the Strait of Hormuz. This waterway is a crucial global oil shipping route, and its reopening would alleviate concerns over potential disruptions in the global oil supply. Countries like Japan, which heavily depend on oil passing through this strait, would particularly benefit from such a development.
As hopes for reduced geopolitical tensions rose, oil prices experienced a significant drop. US benchmark crude fell by over $5 per barrel, while Brent crude also saw a substantial decline. In the currency markets, the US dollar weakened slightly against the Japanese yen, and the euro gained ground.
Analysts noted that investors are shifting their focus from fears of conflict to the expectation of improved global trade and energy stability, should a diplomatic breakthrough occur. Meanwhile, Wall Street had concluded the previous week positively, achieving its eighth consecutive weekly gain. This upward trend was supported by strong corporate earnings, even as concerns about inflation and higher bond yields persisted.
Despite the positive momentum in US equities, US Treasury yields remained higher than pre-conflict levels, indicating continued caution within financial markets. Investors are keenly watching the developments in US-Iran negotiations, which could have significant implications for global economic stability.