Asian stocks experienced cautious gains on Tuesday after an earlier rally driven by news of a US-Iran peace deal. Investors were also assessing a widely anticipated Bank of Japan (BOJ) rate increase, which lifted its benchmark policy rate to 1% – a 31-year high. The Nikkei 225 jumped 0.6% and briefly crossed above the 70,000 mark, reaching an all-time peak following the BOJ's 7-1 vote to hike rates. The yen was flat against the dollar at 160.31.
Optimism regarding the preliminary agreement between Washington and Tehran began to fade, leading markets to adopt a more measured tone on Gulf developments. Westpac analysts noted that while the deal is an important diplomatic breakthrough, its durability is likely to be tested, with key issues like Iran's nuclear program still unresolved. Oil prices reflected this cautious stance, with Brent crude futures sliding 0.3% to US$82.96 a barrel, marking a three-month low. Shippers in Asia and Europe indicated that restoring confidence for transit through the Strait of Hormuz could take weeks.
On Wall Street overnight, stocks and bonds rallied on initial optimism for the deal. The S&P 500 jumped 1.7%, the Nasdaq Composite surged 3.1%, and both the Dow Jones Industrial Average and the STOXX 600 closed at record highs. In Tuesday's Asian trading, S&P 500 e-mini futures were down 0.1%, while MSCI's broadest index of Asia-Pacific shares outside Japan was up 0.4%, with Korean shares rising 2%. The US dollar index was up 0.1% at 99.75, remaining within its recent tight trading channel. The yield on the US 10-year Treasury bond was up 0.8 basis points at 4.475%, and gold increased 0.4% to US$4,324.32. Bitcoin was down 0.8% at US$65,799.61, and Ether slumped 2.1% to US$1,762.15.
