Global financial markets kicked off Thursday with broad gains across most Asian equity benchmarks and stable oil prices, driven growing investor optimism that a temporary ceasefire between the U.S. and Iran will be extended and new diplomatic negotiations will move forward. The conflict, which began in late February, has roiled energy markets and raised widespread concerns over global supply chains, making any signs of de-escalation a major catalyst for risk assets.
In Tokyo, the Nikkei 225 surged 2.4% to close at 59,549.59, while South Korea’s Kospi climbed 2% to 6,215.38. Hong Kong’s Hang Seng index recorded a 1.2% uptick to 26,269.99, and mainland China’s Shanghai Composite edged 0.6% higher to 4,050.42. China’s latest quarterly economic data released Thursday showed 5% year-over-year growth for the first three months of the year, an acceleration from the final quarter of 2023. While most economists note that China’s economy has so far absorbed the initial spillover effects of the Iran conflict relatively well, some caution that the country’s large export-driven manufacturing sector could face more substantial headwinds in coming months as broader global economic growth slows. Elsewhere in the region, Taiwan’s Taiex gained 0.9% in midday trading, while Australia’s S&P/ASX 200 bucked the upward trend to edge 0.1% lower.
The optimism around diplomacy stems from anonymous regional officials who told the Associated Press on Wednesday that Washington and Tehran have reached an “in principle” agreement to extend their existing two-week ceasefire, which is set to expire next week. The two sides are also reportedly making progress toward organizing a second round of formal negotiations. Additional diplomatic efforts are underway, with Pakistani army chief currently visiting Tehran to help broker further talks between the two parties.
Even as hopes for peace grow, the U.S. is moving ahead with plans to increase economic pressure on Iran. U.S. Treasury Secretary Scott Bessent issued a warning this week that Washington is preparing to implement new secondary sanctions targeting any entities that continue business with Iran, including potentially Chinese companies that purchase Iranian crude oil.
Global oil markets held steady on Thursday after months of extreme volatility tied to the conflict. Brent crude, the global benchmark for oil prices, ticked up less than 0.1% to settle at $94.94 per barrel, while U.S. benchmark West Texas Intermediate crude rose 0.4% to $91.66 per barrel. Oil prices spiked sharply immediately after the war began in late February, after the Strait of Hormuz — a critical global shipping chokepoint through which roughly 20% of the world’s daily oil supply passes — was effectively closed to commercial traffic. The U.S. implemented a new naval blockade of Iranian ports this week, aiming to force Tehran to reopen the strait as part of any negotiated ceasefire deal.
Strategists at ING Bank warned in a client note Thursday that significant uncertainty remains for energy markets. “The key upside risk for the market is that peace talks between the US and Iran break down,” wrote analysts Warren Patterson and Ewa Manthey. “This isn’t an unrealistic scenario, given that US and Iranian demands remain fairly wide apart.”
The positive momentum for risk assets already spilled over to U.S. markets on Wednesday, with Wall Street hitting new record highs on the ceasefire optimism. The benchmark S&P 500 climbed 0.8% to close at 7,022.95, surpassing its previous all-time high set back in January. The tech-heavy Nasdaq composite jumped 1.6% to 24,016.02, though the Dow Jones Industrial Average bucked the trend to dip 0.2% to 48,463.72.
Several major U.S. banks outperformed the broader market after releasing stronger-than-expected first quarter earnings results. Bank of America shares rose 1.8%, with CEO Brian Moynihan noting ongoing signs of a resilient U.S. economy, including steady consumer spending. Morgan Stanley followed a similar trajectory, with shares gaining 4.5% after its own positive earnings report. In one of the most notable individual stock moves of the day, San Francisco-based footwear brand Allbirds saw its share price skyrocket 582% to nearly $17 per share after the company announced it would pivot its core business focus to artificial intelligence and rebrand as NewBird AI.
In other commodity trading, safe-haven assets gold and silver both posted gains on Thursday. Gold climbed 0.5% to $4,846.40 per ounce, while silver rose 1.3% to $80.62 per ounce. In currency markets, the U.S. dollar weakened slightly against the Japanese yen, falling to 158.58 yen from 159 yen in the prior session. The euro also ticked higher, trading at $1.1814 up from $1.1799 on Wednesday.