Stock markets across Asia saw significant gains on Monday, with Japan’s Nikkei 225 index leading the charge by climbing 2.8%. This positive movement occurred amid reports of progress in negotiations between the United States and Iran to resolve their ongoing conflict. The potential for a diplomatic breakthrough buoyed investor sentiment, as did the prospect of reopening the Strait of Hormuz, a vital passage for global oil shipments. Meanwhile, markets in South Korea and Hong Kong were closed for public holidays, and U.S. markets were also shut in observance of Memorial Day.
Amid these developments, oil prices fell sharply, reflecting hopes of easing geopolitical tensions. U.S. benchmark crude prices dropped by more than $5 per barrel, and Brent crude also saw a notable decrease. The possible reopening of the Strait of Hormuz, one of the world’s key energy corridors, is seen as a positive step that could stabilize global oil supplies and alleviate concerns over potential disruptions. This is particularly significant for countries like Japan, which heavily depend on oil transported through the strait.
In the currency markets, the U.S. dollar weakened slightly against the Japanese yen, while the euro gained some ground. Analysts noted that investors are beginning to shift their focus from fears of conflict to expectations of improved global trade and energy stability, should a successful diplomatic resolution be reached.
Despite ongoing concerns about inflation and elevated bond yields, Wall Street ended the previous week on a high note, marking its eighth consecutive weekly gain. Strong corporate earnings have helped maintain investor confidence in the face of these challenges. U.S. Treasury yields remained higher than pre-conflict levels, indicating continued caution in financial markets.