Asian stocks advanced on Friday, the US dollar held near six-week highs, and oil prices were volatile as investors hoped for progress in peace talks between the US and Iran, although both sides remain at odds on key issues.
Investors remain concerned about the imminent closure of the vital Strait of Hormuz, which has spiked oil prices and disrupted global energy supply prospects, impacting interest rates due to inflation fears.
US Secretary of State Marco Rubio noted “some encouraging signs” in the negotiations to end the American-Israeli war against Iran, ongoing for nearly three months, but differences persist regarding Tehran’s uranium stocks and control of the strait.
In Asian-Pacific markets, the MSCI index outside Japan rose by 0.8%, marking a slight weekly increase. The Japanese Nikkei gained 2.8%, hitting a new record, while Taiwanese stocks climbed by 2.3%.
US and European stock futures also made gains, with investors buoyed by Nvidia’s strong results this week and a series of solid performances from major tech firms.
Oil prices rebounded on Friday after sharp declines, with mixed messages on Iran negotiations leaving investors uncertain. Prices, though above pre-war levels, are expected to remain high even if a resolution is reached.
Brent crude futures rose by 1.9% to $104.56 per barrel, while WTI futures gained 1.35% to $97.64. Extended energy disruptions amid ongoing war threats worldwide are prompting traders to anticipate rate hikes in both developed and emerging markets.
Markets are now expecting potential rate hikes from the US Federal Reserve by year-end, compared to previous expectations of rate cuts before the conflict.
The strong link between oil prices and global rates is reflecting the borderless impact of the crisis, with central banks likely to maintain restrictive monetary policies for longer to stabilize prices, as noted by Mitch Reznick from Federated Hermes.
The surge in Treasury yields and a firm demand for safe-haven assets have boosted the dollar, with the euro at a six-week low of $1.1614. The dollar index stood at 99.247 against a basket of currencies, while the yen was at 159.11 per dollar, nearing the critical 160 level prompting fears of further Japanese market interference.
Recent yen weakness follows a $65 billion intervention by Tokyo a few weeks ago to support the currency. Friday’s data showed Japan’s underlying inflation slowed to a four-year low in April, complicating the outlook for the Bank of Japan’s rate hike path.
ING senior economist Min Joo Kang stated that a better-than-expected first-quarter GDP and strong April export data demonstrate the resilience of the Japanese economy despite energy shocks, reinforcing the Bank of Japan’s rate hike decision.
[Context: The article discusses the impact of ongoing peace talks between the US and Iran on global markets, particularly on oil prices and currency exchange rates. It also highlights the potential implications of extended energy disruptions and inflation fears on interest rates and monetary policy decisions.]
[Fact Check: The automated translation disclaimer indicates the content was translated using machine learning and AI, emphasizing the need for caution regarding accuracy and nuances in the text.]
