Oil Drops, Stock Rally Builds on Iran Optimism – Asia Market Wrap
Global equities surged after Trump said the US was close to reaching an agreement with Iran, boosting hopes for a diplomatic resolution to a conflict that has driven volatility across markets for more than three months. MSCI’s Asia Pacific Index jumped 3.5%, its biggest gain in two months, while South Korea’s Kospi soared 8.4% as investors piled back into AI-related shares. Futures pointed to further gains on Wall Street following Thursday’s rally, and European stocks were set to open 1.8% higher.
Oil extended its retreat as geopolitical risk premiums continued to unwind. Brent crude fell 2% to around $88.50 a barrel after Trump backed away from threatened military action, citing high-level discussions with Iranian leadership aimed at ending the war. Trump said a formal signing ceremony could take place as soon as this weekend in Europe, with JD Vance expected to attend.
Treasuries held onto Thursday’s gains, with the 10-year yield steady at 4.46%. Expectations for lower geopolitical risk and softer inflation pressures helped drive yields lower across the curve during the previous session.
Rate markets also shifted significantly. Traders pushed back expectations for the next Fed rate hike, with short-term interest-rate contracts no longer fully pricing a 25 bps increase by December. Instead, markets now see the next potential hike occurring in the first quarter of 2027, reflecting easing concerns about conflict-driven inflation pressures.
The sharp rebound in risk assets highlights how quickly sentiment has turned as investors bet a diplomatic resolution could remove a major source of uncertainty for global growth, energy markets, and monetary policy.
