Asian stocks remained steady and oil prices declined on Thursday as investors evaluated progress toward ending conflict in the West Asia. This followed the signing of an interim peace deal by the presidents of the US and Iran, though uncertainties persisted regarding the agreement’s long-term impact.
Both countries released the text of the agreement, which had circulated widely before its official publication. The deal extends a ceasefire, initially announced in April, by an additional 60 days. This extension aims to provide a window for the two sides to negotiate a final truce.
US President Donald Trump issued a warning, stating he would resume attacks and target Iranian officials if they failed to honor their commitments under the agreement. This threat introduces a significant element of risk into the perceived stability of the interim deal.
Kyle Rodda, a senior financial market analyst at Capital.com, noted that “Major geopolitical risk persists and will also remain a major driver of market action.” This sentiment reflects ongoing concerns despite the signed agreement.
MSCI’s broadest index of Asia-Pacific shares outside Japan was flat. Japan’s Nikkei share average reached a new record high, surpassing the 71,000 level for the first time, driven by strong performance in semiconductor and AI-related shares. South Korean shares also gained 0.9 per cent. US stock futures, specifically the S&P 500 e-minis, were up 0.81 per cent at 7,484.8.
Oil prices experienced a decline. US crude dipped 1.25 per cent to $75.83 a barrel, while Brent crude fell 1.4 per cent to $78.41 per barrel. This drop occurred as investors weighed the implications of the Iran war deal and the uncertainty surrounding the reopening of the Strait of Hormuz.
The benchmark 10-year Japanese government bond yield rose 2 basis points to 2.620 per cent. This put it in a position for its highest close since June 16, after earlier reaching 2.63 per cent.
Overnight on Wall Street, all three major indexes fell by close to or more than 1 per cent. Traders reacted to expectations that the Federal Reserve’s next action would be a rate hike. New Fed Chair Kevin Warsh had emphasized the need to control inflation, and other policymakers projected rising interest rates later in the year. The Dow Jones Industrial Average fell 507.12 points, or 0.98 per cent, to 51,492.55. The S&P 500 dropped 91.25 points, or 1.21 per cent, to 7,420.10, and the Nasdaq Composite declined 354.69 points, or 1.34 per cent.
The immediate market reaction suggests a cautious optimism, tempered by the explicit threats from the US president. The coming weeks will reveal whether the ceasefire extension can pave the way for a more permanent resolution or if the underlying geopolitical tensions will re-emerge, influencing global markets.
Investors will monitor the negotiations between the US and Iran closely for any signs of progress or breakdown, as well as statements from key officials. The Federal Reserve’s future monetary policy decisions, particularly regarding interest rates, will also remain a significant factor for market direction.