Market sentiment improved as oil prices retreated on news that the Strait of Hormuz is expected to reopen for navigation in the near term. On Monday, Japan's Nikkei 225 index broke through the 65,000-point mark for the first time in history, reaching a record high during a holiday-thinned trading session in Asia.
U.S. President Donald Trump stated on Truth Social that negotiations with Iran are proceeding "in an orderly and constructive manner," adding that he has instructed his representatives "not to rush into an agreement, as time is on [their] side." Following these remarks, oil prices fell by more than 5%, alleviating investor concerns. Previously, prices had surged significantly after the Trump administration imposed a blockade on Iranian ports and Iran effectively closed the Strait of Hormuz, one of the world's most critical energy waterways.
In early Asian trading, WTI futures for July delivery declined 4.52% to $92.23 per barrel, while Brent crude futures for July dropped 4.51% to $98.87 per barrel.
Japan's Nikkei 225 index rose 3%, surpassing 65,000 points to set a new all-time high, while the Topix index gained 0.65%. Australia's S&P/ASX 200 index was flat. Markets in Hong Kong and South Korea were closed for public holidays. U.S. stock markets will also be closed on Monday for Memorial Day.
During regular trading on Friday, the Dow Jones Industrial Average advanced 294.04 points, or 0.58%, to close at 50,579.70. The 30-stock index achieved a new intraday record and again set a fresh closing high. The S&P 500 rose 0.37% to finish at 7,473.47, and the Nasdaq Composite climbed 0.19% to 26,343.97.
**U.S.-Iran Peace Deal "Emerges"** Buoyed by optimistic expectations for the resumption of crude oil shipments through the Strait of Hormuz, market risk appetite recovered. In addition to gains in Japanese stocks, oil prices and the U.S. dollar declined, while U.S. stock futures moved higher.
The crisis began in February with U.S. and Israeli strikes on Iran, throwing global energy markets into disarray. The conflict quickly spread across the Persian Gulf region, forcing producers to shut down millions of barrels of daily crude supply. The Strait of Hormuz, connecting the region to global markets, had been under a dual blockade by Tehran and Washington. In peacetime, this waterway typically handles about one-fifth of the world's oil and liquefied natural gas supply. Its full reopening would provide relief for energy-importing nations across Asia, including Japan and South Korea.
After weeks of stalemate following a ceasefire agreement between the U.S. and Iran in April, market sentiment is now rebounding. Traders had been closely monitoring the economic fallout from the conflict.
U.S. consumer confidence in May fell to a record low, while long-term inflation expectations deteriorated significantly. This week, U.S. Personal Consumption Expenditures (PCE) data and inflation figures from across Europe will be in focus. Previously, bond yields had surged to multi-year highs on concerns that price pressures would remain elevated and force central banks to raise interest rates.
Traders have fully priced in expectations for a Federal Reserve rate hike by year-end, underscoring market anticipation that Chair Jerome Powell will need to act swiftly to combat inflation. Strategists anticipate that global bond yields will remain elevated, even if a U.S.-Iran agreement can ease oil-driven inflationary pressures.
Investors are also grappling with concerns that already substantial public debt burdens will continue to increase. Simultaneously, the funding demands of the artificial intelligence (AI) investment boom are placing further pressure on global financing markets.
