Asian shares experienced a significant jump on Thursday, with benchmarks in Japan and South Korea reaching new records, following the initial agreement signed between the U.S. and Iran to end their conflict. The Nikkei 225 in Tokyo surged 1.9% to 71,233.35, surpassing 70,000 for the first time this week. South Korea's Kospi likewise set a record, gaining 0.6% to 8,917.31, and Taiwan's Taiex jumped 1%. This rally in Asia happened despite a retreat on Wall Street the previous day, driven by speculation that the Federal Reserve might raise interest rates this year to curb inflation. U.S. futures were higher early Thursday, suggesting a potential rebound after the U.S. market closed lower on Wednesday.
The U.S.-Iran deal, which aims for a permanent end to hostilities, initiates a 60-day negotiation period for a final agreement on Iran's nuclear program, requiring Tehran to dilute its stockpile of highly enriched uranium. Importantly, the agreement waives U.S.-backed sanctions, immediately allowing Iran to sell its oil freely. This news prompted a decline in oil prices, with Brent crude falling 1.6% to $78.31 and U.S. benchmark crude slipping 1.7% to $74.75 early Thursday. Optimism about the reopening of the Strait of Hormuz, crucial for global oil flow, is expected to alleviate inflationary pressures.
However, the Federal Reserve's projections on Wednesday caused a slump in U.S. markets, with the S&P 500 dropping 1.2% to 7,420.10, the Dow Jones Industrial Average falling 1% to 51,492.55, and the Nasdaq composite sinking 1.3% to 26,021.66. Nearly half of the Fed's policymakers foresee at least one interest rate increase in 2026. Despite the broad Asian gains, some markets showed mixed results; Hong Kong's Hang Seng lost 1.4% to 23,968.66, and Australia's S&P/ASX 200 slipped 0.4% to 8,930.50, while the Shanghai Composite index edged 0.1% higher. The U.S. dollar rose to 160.62 Japanese yen from 159.75 yen, and the euro traded at $1.1515, up from $1.1503.
