Asian stocks advanced while oil prices declined during Asian trading after US President Donald Trump said the war in the Middle East could be close to its end. His remarks sparked a wave of cautious optimism across financial markets.
However hopes for a quick resolution faced a setback after Iranian military forces issued firm statements confirming that fighting would continue which returned a sense of caution to global markets.
In volatile trading the MSCI broad index of Asia Pacific shares excluding Japan rose about 2.8 percent trimming part of its losses since the conflict began. At the same time Brent crude futures dropped as much as 11 percent falling below 88.05 dollars per barrel before later reducing losses to around 6.6 percent. US equity futures were calmer with S&P 500 mini futures slipping about 0.2 percent following the rebound seen on Wall Street in the previous session.
Trump’s remarks briefly lifted market sentiment but were accompanied by opposing developments in Iran where hardliners announced support for the new Supreme Leader Mojtaba Khamenei while Revolutionary Guard forces stated that the blockade on oil exports would continue until US and Israeli attacks stop sending a direct challenge to Washington.
These conflicting signals triggered sharp volatility in global markets as oil prices initially surged and Wall Street stocks declined before reversing direction after Trump’s comments and reports suggesting that Washington may ease some sanctions on the Russian energy sector.
Analysts believe that the softer tone from the United States helped calm market fears temporarily as Trump’s language shifted from demanding full surrender to saying the mission was largely accomplished which observers viewed as a positive development that could help stabilize investor sentiment at least during Asian trading sessions.
With risk appetite improving after the recent selloff the Japanese Nikkei 225 index rose about 2.7 percent while South Korea’s Kospi index jumped as much as 6.6 percent before trimming some gains. The rally triggered a temporary trading halt mechanism on the Korean exchange after futures climbed more than 5 percent causing automated trading to pause for five minutes.
In China the CSI 300 index gained about 1.1 percent after customs data showed faster export growth during January and February keeping the world’s second largest economy on track for a record trade surplus that could exceed 1.2 trillion dollars this year.
Despite the rebound in equities the overall market outlook remained tense after the Iranian military warned of intensified missile strikes signaling further escalation. Trump later responded on Truth Social warning that any Iranian move to disrupt oil flows through the Strait of Hormuz would face a US response twenty times stronger than previous strikes.
Meanwhile US Treasury bonds regained part of their strength after the earlier surge in oil prices raised inflation concerns and increased expectations that central banks in Europe may tighten monetary policy later this year.
The yield on the US ten year Treasury note fell about 2.1 basis points to 4.111 percent although traders postponed expectations for interest rate cuts from the Federal Reserve with the first reduction now not expected before July according to the CME FedWatch tool.
US dollar index which measures the performance of the US currency against a basket of six major currencies held broadly steady after a sharp drop in the previous session that erased most of the gains recorded over the past week leaving the index trading near the 98.84 level.
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