Asian stock markets mostly experienced gains on Monday, while oil prices saw a sharp decline following US President Donald Trump’s comments that negotiations with Iran were advancing. Japan’s Nikkei 225 index led the regional rise with a 2.8% jump, supported by advances in Australia’s S&P/ASX 200 and China’s Shanghai Composite. Meanwhile, markets in South Korea and Hong Kong were closed for public holidays, and US markets were not operating due to Memorial Day.
The prospect of a diplomatic resolution between the United States and Iran contributed to improved investor sentiment. Reports indicated progress toward a potential agreement that could resolve the conflict and lead to the reopening of the Strait of Hormuz, a critical passage for global oil shipping. The strait’s reopening would alleviate concerns about disruptions to global oil supplies, which are particularly significant for countries like Japan that depend heavily on oil transported through this route.
As hopes for reduced geopolitical tensions rose, oil prices plummeted, with US benchmark crude falling over $5 per barrel and Brent crude also seeing a notable decrease. In the currency markets, the US dollar weakened slightly against the Japanese yen, while the euro made gains.
Analysts suggested that investors are now focusing more on potential improvements in global trade and energy stability, should a diplomatic breakthrough be achieved. This shift in focus comes despite ongoing worries about inflation and higher bond yields. Wall Street concluded the previous week positively, marking its eighth consecutive weekly gain, buoyed by strong corporate earnings that bolstered investor confidence.
US Treasury yields remained high compared to levels before the conflict, indicating sustained caution in financial markets. However, the potential for easing geopolitical tensions is fostering a more optimistic outlook among investors, as they anticipate positive developments in global trade dynamics and energy security.