Asian stock markets experienced significant rallies, with Japan's Nikkei 225 reaching an intraday record high of 71,233.35, a 1.9% increase. South Korea's KOSPI index also hit a record high of 9,000.68, gaining 0.6%, while Taiwan's Taiex jumped 1% to 46,565.70. These gains were largely attributed to the interim peace deal between the US and Iran, which boosted investor sentiment, particularly in semiconductor and AI-related shares. MSCI's broadest index of Asia-Pacific shares outside Japan edged 0.2% higher.
The energy markets saw a downturn as the US-Iran deal, which includes the full resumption of maritime traffic in the Strait of Hormuz, led to expectations of increased crude supply. Brent crude futures fell 2.3% to $77.70 a barrel, a three-month low, while benchmark US crude futures dropped 2.7% to $74.70 a barrel. This decline in oil prices was seen as a positive for energy-importing regions like Europe, easing concerns about an economic slowdown. The International Energy Agency also stated that the oil market would move into a significant supply surplus by 2027.
The interim agreement extends an April ceasefire by another 60 days, allowing for negotiations on a final truce and includes the lifting of the US naval blockade on Iranian ports. However, despite the agreement, some security concerns remain regarding shipping safety in the Strait of Hormuz. Jakob Larsen, chief safety and security officer at BIMCO, advised shipowners to conduct thorough risk assessments due to perceived volatility. US President Donald Trump also cautioned that he could resume attacks if Iran does not honor its commitments.
The US stock market also reacted positively, with S&P 500 E-minis up 0.7%, Nasdaq 100 E-minis rising 1%, and Dow E-minis advancing 0.5% in Asian trading hours. In bond markets, the yield on benchmark US 10-year notes fell 1.76 basis points to 4.445%, and the 2-year note decreased by 0.12 basis points to 4.162%. The dollar weakened 0.02% against the yen to 160.59 but the dollar index remained largely unchanged at 100.23, clinging to a more than two-month high.
The deal also waives US-backed sanctions on Iran, allowing the country to sell its oil freely. This concession from Washington is expected to alleviate pressure on inflation. Yoshimasa Maruyama, chief market economist at SMBC Nikko Securities, acknowledged the significant step towards normalizing crude supply and prices but cautioned that uncertainties persist, reflecting the complex nature of the geopolitical situation.
