Asian shares climbed on Tuesday while oil prices dropped, as investor fears of a major energy shock eased following US President Donald Trump's announcement of a ceasefire between Iran and Israel.
Markets were reassured after Iran did not retaliate to a US strike on its nuclear facilities by disrupting oil transport through the Strait of Hormuz. Instead, Iran launched missiles at a major US base in Qatar, which later said the situation was stable. Analysts noted that oilfield assets were unaffected.
"Tehran played it cool. Their 'retaliation' hit a US base in Qatar- loud enough for headlines, quiet enough not to shake the oil market's foundations," said Stephen Innes of SPI Asset Management.
He added that the perceived de-escalation caused the "war premium" to fall sharply, with Brent and WTI crude both sliding more than seven percent overnight.
On Tuesday, both contracts continued to decline, with Brent down 2.2 per cent at $69.24 per barrel and West Texas Intermediate falling 2.3 per cent to $66.19.
Asian stock markets reacted positively. Tokyo’s Nikkei 225 and Hong Kong’s Hang Seng Index both rose 1.4 per cent, Shanghai’s Composite gained 0.8 per cent, and Seoul’s Kospi jumped 2.7 per cent. Singapore added 0.7 per cent, Sydney rose 1.1 per cent, and Taipei was up 1.8 per cent. However, Jakarta bucked the trend, falling 1.7 per cent.
Trump said Iran and Israel had agreed to a staggered ceasefire aimed at officially ending their conflict, though airstrikes were still ongoing in Tehran. Iran’s foreign minister said Tuesday that Tehran would not continue strikes if Israel halted its attacks.
"Details of the ceasefire agreement are still sparse at the time of writing and as such the detente and de-escalation is not a done deal," said Michael Wan of MUFG. Still, he noted that reports suggest Iran has agreed to the ceasefire, which reduced the risk of extreme scenarios affecting global oil supply.
In currency markets, the dollar weakened after Federal Reserve governor Michelle Bowman said she would support a rate cut at the Fed's July meeting if inflation remains steady. The market currently expects the next rate cut in September. Bowman pointed to ongoing tariff negotiations and a less risky economic outlook as factors supporting policy easing.
Key market figures (as of 0200 GMT):- Nikkei 225 (Tokyo): +1.4% at 38,873.07
- Hang Seng Index (Hong Kong): +1.4% at 24,025.13
- Shanghai Composite: +0.8% at 3,886.66
- WTI Crude: -2.3% at $66.19 per barrel
- Brent Crude: -2.2% at $69.24 per barrel
- Euro/Dollar: $1.1590 (up)
- Pound/Dollar: $1.3539 (up)
- Dollar/Yen: 145.66 yen (down)
- Dow Jones (New York): +0.9% at 42,581.78
- FTSE 100 (London): -0.2% at 8,758.04
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