Global markets experienced a significant shift on Friday, with Asian shares climbing sharply in response to U.S. President Donald trump‘s announcement of a breakthrough in talks to end the Iran war. This development came after a week of heightened tensions and market volatility, particularly in the technology and oil sectors.
The news sparked a wave of optimism among investors, leading to substantial gains across various Asian markets. The renewed investor confidence was particularly evident in South Korea, where the Kospi index surged by 7.8%reaching 8,370.82. This marked a notable recovery from earlier losses in the month, which were attributed to sell-offs in artificial intelligence-related shares.
South Korea and Japan Lead Market Surge
South Korea’s market saw significant gains, with Samsung Electronicsthe country’s most valuable company, advancing by 11.2%. Similarly, computer chipmaker SK Hynix rose by 7.2%reflecting the broader market’s positive sentiment. The Kospi has roughly doubled over the past six months, with a record closing high of 8,801.49 on June 2.
In Japan, Tokyo’s Nikkei 225 gained 3.5% to 66,442.95led by gains in technology stocks. SoftBank Groupa multinational investment holding company with a strong focus on AI, was up by 2%while chip equipment maker Tokyo Electron jumped by 10.3%. The positive momentum extended to other Asian markets, with Hong Kong’s Hang Seng gaining 1.8% to 24,689.32 and the Shanghai Composite index rising by 1.6% to 4,050.51.
The Impact of Trump’s Announcement
The renewed investor optimism came after Trump announced on Thursday that he had called off military strikes against Iran. He asserted that the U.S. had made a great settlement of the war with Iranadding that an extension of the shaky ceasefire between the two sides could be finalized in the next few days. Few details were offered, leaving some analysts cautious about the deal’s certainty.
Global markets had retreated earlier in the week as tensions between the U.S. and Iran escalated. High oil prices have added to inflationary pressures globally as the Strait of Hormuz, a key waterway for the world’s oil and gas transit, remained largely closed. Analysts from INGincluding Warren Patterson and Ewa Mantheynoted that while there appears to be more positive noise around the deal this time, caution is warranted.
Trump has said many times before that a deal is very close, only for hostilities to resumethey wrote in a note on Friday. We would be cautious about assuming that the extension of the ceasefire is a done deal. Even if it is, it could be fragile.
Oil Prices and U.S. Market Reactions
Brent crude oil, the international standard, fell by 1.7% to $88.87 per barrel early Friday. This was still significantly higher than the roughly $70 a barrel level it was at before the war began in late February. Benchmark U.S. crude shed 1.6% to $86.33 a barrel.
On Thursday, Wall Street’s benchmark S&P 500 surged by 1.8% to 7,394.30back to where it was in early May. The Dow Jones Industrial Average rallied by 1.9% to 50,848.75and the technology-heavy Nasdaq composite climbed by 2.5% to 25,809.66.
Prices of AI and other tech stocks have been volatile over the past week due to renewed worries about a potential bubble. On Thursday, U.S. chipmaker Marvell Technology climbed by 11.1%while technology company Oracle lost 8.5% on concerns over its high spending, despite strong-than-expected quarterly results.
Investors in the U.S. and elsewhere are also eagerly awaiting the big debut of SpaceXElon Musk’s rocket company, which is set to become the largest IPO on record, raising around $75 billion.
In other dealings early Friday, the U.S. dollar rose to 160.22 Japanese yen from 159.93 yen. The euro was trading at $1.1574down from $1.1578.
