Asian share markets experienced a rally on Monday following statements from Iranian negotiators indicating progress in peace talks with the United States. Mediating officials from Qatar and Pakistan confirmed the conclusion of the first session of talks and outlined a roadmap for a final deal within 60 days. This positive development helped alleviate fears that the peace process was faltering, despite earlier threats from U.S. President Donald Trump and Iran's announcement of a renewed closure of the Strait of Hormuz.
The progress in talks significantly impacted commodity markets. Brent crude futures initially gained but then eased by 0.4% to $80.17 a barrel, a substantial drop from its May peak of $126.41. U.S. crude, however, remained 1.2% firmer at $77.52 a barrel. Gold prices also saw a boost, bouncing 1.1% to $4,205 an ounce, likely due to the calming of geopolitical tensions in the Middle East. The agreement included plans to reopen the Strait of Hormuz, a crucial choke point for global energy shipments, and to end hostilities in Lebanon.
Stock markets across Asia reacted positively. Japan's Nikkei rose 1.9%, continuing an almost 8% climb from the previous week. South Korea's market added 2.6%, extending its more than 11% surge last week driven by semiconductor demand. MSCI's broadest index of Asia-Pacific shares outside Japan gained 1.0%, though Chinese blue chips remained flat. Emerging-market stocks collectively added 1.5%, marking a third consecutive session of gains and pushing their year-to-date advance to almost 22%. Conversely, S&P 500 futures pared early losses to be off 0.2%, and Nasdaq futures lost 0.3%. European markets also showed mixed reactions, with EUROSTOXX 50 futures down 0.1%, DAX futures nearly flat, and FTSE futures up 0.1%.
Treasuries remained under pressure due to a hawkish stance by the Federal Reserve, which led markets to price in a 75% chance of a rate hike as early as September. Futures imply 38 basis points of tightening by year-end, and yields on 2-year notes rose as much as 4 basis points to their highest since early 2025 at 4.2276%. The dollar remained strong against the yen at 161.48, largely supported by the Fed's outlook and only limited by potential Japanese intervention. The euro weakened to $1.1464, and political uncertainty contributed to sterling's 0.2% dip to $1.3210.
Negotiations involved U.S. Vice President JD Vance meeting Iranian officials for preliminary talks under an interim peace deal, despite threats from President Trump to reinitiate attacks. The talks were complicated by Tehran's closure of the Strait of Hormuz, which saw a significant reduction in vessel transits. However, the agreement stipulated the establishment of a communication line to ensure safe passage for commercial ships through the strait and an end to fighting in Lebanon. Iran also reportedly secured waivers for oil and petrochemical shipments.
