A sweeping risk-on rally swept through Asian equity markets on Thursday, with Tokyo’s benchmark index leading sharp gains across the region as two key catalysts — rising hopes for a negotiated end to the US-Iran conflict and a resurgent wave of artificial intelligence investment — lifted investor sentiment to multi-week highs.
The upward momentum followed a dramatic shift in geopolitical tone earlier this week, after US President Donald Trump announced that a deal to end hostilities between Washington and Tehran was within reach. Speaking to reporters Wednesday, Trump confirmed that constructive talks had taken place over the preceding 24 hours, noting that “it’s very possible that we’ll make a deal.” If Iran agrees to the terms already outlined, he said, the war would end immediately; a rejection would see US bombing resume at “a much higher level and intensity.”
US-based news outlet Axios later reported, citing two unnamed senior US officials, that both negotiating teams have edged close to finalizing a concise one-page memorandum of understanding. The draft agreement would end active hostilities, reopen the critical Strait of Hormuz, and establish a framework for follow-up negotiations over Iran’s nuclear program. The Strait of Hormuz, a chokepoint that handles roughly one-fifth of the world’s daily crude oil supplies, has been effectively closed to commercial shipping since early March, tightening global energy markets and pushing oil prices sharply higher.
Iran has not yet formally accepted the US proposal. Foreign ministry spokesman Esmaeil Baqaei told local Iranian media that the offer remains “still under review,” while parliament speaker Mohammad Bagher Ghalibaf — who has led Iran’s negotiation team — warned that Washington’s approach amounted to an attempt to “force us to surrender.” Still, Pakistani Prime Minister Shehbaz Sharif, who mediated early exploratory talks hosted in Islamabad last month, said he remained “very hopeful” that a breakthrough could be reached.
The rising prospect of de-escalation triggered sharp swings across global commodity and financial markets this week. Oil prices, which fell roughly 10% over the preceding two trading days on hopes of the Hormuz strait reopening, held steady on Thursday: West Texas Intermediate traded flat at $95.08 per barrel, while Brent North Sea Crude edged up 0.1% to $101.32 per barrel. Lower energy price expectations have also eased persistent inflation concerns, lifting gold prices more than 3% in Wednesday’s session and driving a broad rally in bonds.
In equity markets, the positive geopolitical shift aligned with a fresh wave of investor enthusiasm for AI-related assets, building on record gains from Wall Street in the prior session. Strong quarterly earnings from leading US tech giants including Microsoft, Apple and Alphabet reignited buying pressure for technology stocks across Asia, amplifying the risk-on rally.
Tokyo’s Nikkei 225 led regional gains, surging 5.7% to close at 62,915.87 as Japanese investors returned from an extended public holiday. SoftBank, Japan’s leading technology investment firm, rocketed more than 15% on the day, while key chip industry players Tokyo Electron and Advantest notched double-digit gains. In Seoul, the benchmark Kospi extended the prior day’s rally to close above the 7,000-point milestone for the first time in history, with Samsung continuing its upward march after recently crossing the $1 trillion market capitalization threshold. Major markets across Hong Kong, Shanghai, Sydney, Singapore, Taipei, Wellington, Manila and Jakarta all posted solid gains on the day.
Stephen Innes, managing partner at SPI Asset Management, noted that the confluence of positive catalysts created near-perfect conditions for a broad market rally. “Traders aggressively embraced the idea that the Iran war may finally be shifting from missile trajectories to negotiation tables, while the AI frenzy simultaneously poured jet fuel onto the risk rally,” he said. “The result was one of those rare sessions where nearly every macro domino fell in perfect sequence. Oil collapsed, bonds rallied, the dollar sank, gold exploded higher, and stocks surged.”
Japanese investors also remained focused on currency movements this week, amid persistent speculation that Japanese authorities have intervened in foreign exchange markets to prop up the yen, which has faced downward pressure from surging oil prices and safe-haven flows into the US dollar. The yen hit a 10-month high against the greenback on Wednesday, fuelling rumors of official support. Local Japanese media reported last week that the government spent between $32 billion and $38 billion buying yen in the market, citing data from the Bank of Japan. Atsushi Mimura, Japan’s top currency official, declined to comment on the speculation when asked by reporters Thursday. The dollar traded at 156.23 yen on Thursday, down slightly from 156.39 yen at the close of Wednesday’s session.