On Friday, Asian equities advanced, positioning for their best weekly performance in over three years. As Israel seeks negotiations with Lebanon, markets are anticipating a potential de-escalation of Middle East hostilities and the reopening of the Strait of Hormuz.
Iran stated that Israel's continued strikes on Lebanon are an obstacle preventing a ceasefire agreement with the United States. The proposed deal requires Iran to reopen the Strait of Hormuz, a passage typically used for transporting roughly one-fifth of the world's energy supplies. Delegations from Iran and the United States are scheduled to meet in Pakistan on Saturday.
The MSCI Asia Pacific ex-Japan broad index rose 0.9%, bringing its weekly gain to 7.3%, the largest since November 2022. China's ChiNext Index led the gains, climbing 3.8%.
US S&P 500 mini futures erased earlier losses to trade flat.
"We view this as a potential beginning of the end of the war, offering investors an opportunity to return to pre-war trends and fundamentals," said Rupal Agarwal, Asian Quantitative Strategist at Bernstein in Singapore. "We recommend increasing holdings in some previously hard-hit individual stocks."
On Thursday, the S&P 500 index rose 0.6%, and the MSCI global equity benchmark index edged higher. This followed the heaviest bombardment in Lebanon since the war began the previous day, which resulted in over 300 casualties and jeopardized the US-Iran ceasefire talks. Subsequently, Israeli Prime Minister Benjamin Netanyahu indicated that direct negotiations with Beirut are being sought.
Oil markets remained tense, recovering slightly from a one-month low hit earlier in the week. Brent crude oil rose 1.5% to $97.33 per barrel.
Shipping traffic through the Strait of Hormuz remains largely disrupted, with Thursday's maritime volume significantly below 10% of normal levels. Iran controls this strategic waterway.
The strait's closure during the six-week Iran conflict has impacted global markets, causing oil prices to surge and tightening worldwide energy supplies.
US President Donald Trump posted on Truth Social, criticizing Iran for performing "very poorly" in allowing oil passage through the strait, stating, "This is not consistent with the agreement we reached!"
Regional Impact
Japanese Prime Minister Sanae Takaichi stated at a cabinet meeting on Friday that Japan plans to release petroleum reserves equivalent to 20 days of consumption starting in May to ensure stable domestic supply.
Japan's Nikkei 225 index surged 1.8%, with heavyweight Fast Retailing hitting a record high. This followed the Uniqlo parent company reporting better-than-expected profit growth the previous day. The yen weakened 0.2% against the US dollar.
South Korea's KOSPI index rose 1.4%, recording its best weekly performance in nearly five years. The market strengthened despite the Bank of Korea keeping its policy rate unchanged on Friday and warning that an escalation of the Middle East conflict could dampen economic growth and exacerbate inflation.
"With the new governor taking office at the end of April, the Bank of Korea is signaling a cautious and balanced approach, keeping its options open for future policy decisions," wrote ING analysts in a research note.
The US Dollar Index, which measures the dollar against a basket of six major currencies, rose 0.1% to 98.93.
Data released on Thursday showed US weekly initial jobless claims increased by 16,000 to 219,000, while continuing claims fell by 38,000 to 1.794 million, the lowest level since May 2024.
The core PCE price index increased 0.4% for the second consecutive month, rising 3.0% year-on-year.
The yield on the 10-year US Treasury note rose 0.4 basis points to 4.295%.
In cryptocurrencies, Bitcoin fell 1.0% to $71,723.34, while Ethereum declined 1.3% to $2,185.33.
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