Asian stock markets experienced a predominantly positive session on Monday, with notable gains following US President Donald Trump’s remarks about progress in negotiations aimed at resolving the conflict with Iran. Japan’s Nikkei 225 index led the advances, rising by 2.8%, while Australia’s S&P/ASX 200 and China’s Shanghai Composite also recorded significant upticks. Conversely, markets in South Korea and Hong Kong were closed due to public holidays, and US financial markets observed a closure for Memorial Day.
Reports suggesting a potential agreement between the United States and Iran have buoyed investor sentiment, with hopes that a resolution could lead to the reopening of the Strait of Hormuz. This vital maritime passageway is crucial for global oil shipping, and its accessibility would alleviate concerns about disruptions in oil supply, particularly benefiting countries like Japan that rely heavily on oil imports through this route.
The anticipation of reduced geopolitical tensions has resulted in a sharp decline in oil prices, with US benchmark crude falling by more than $5 per barrel and Brent crude also experiencing a significant drop. In the currency markets, the US dollar weakened slightly against the Japanese yen, while the euro showed gains, reflecting a shift in investor focus towards improved global trade prospects and energy stability.
Wall Street concluded the previous week on a strong note, achieving its eighth consecutive weekly gain. This positive performance was underpinned by robust corporate earnings, which bolstered investor confidence despite ongoing concerns over inflation and higher bond yields. Meanwhile, US Treasury yields continued to remain elevated compared to levels seen before the conflict, indicating a persistent cautious sentiment in financial markets.