Asian equities pushed higher Thursday as investors looked past the formal signing of a US-Iran interim peace agreement, focusing instead on what the 60-day truce means for oil flows and regional stability.
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Nikkei tops 71,000 as Asian markets shrug off US-Iran deal risks
Asian equities climbed, with Japan's Nikkei 225 topping 71,000 for the first time, as investors looked past the formal signing of a US-Iran interim peace agreement.
"Oil markets retreated on expectations the Strait of Hormuz would reopen following the peace agreement, but traders held off further selling pending details," Hiroyuki Kikukawa, chief strategist at Nissan Securities Investment, said.
The Nikkei 225 briefly touched 71,000 before paring gains, while the Bank of Japan raised its key interest rate to 1%. Brent crude futures edged up 0.6% to $79.43 a barrel, and West Texas Intermediate rose to $76.53, clawing back some of the previous session's losses after both benchmarks fell about 5% for a second straight day to three-month lows. The American Petroleum Institute reported US crude stocks fell by 8.3 million barrels in the week ended June 12, exceeding expectations for a 4.6 million barrel draw.
The 14-point memorandum of understanding extends an April ceasefire by 60 days and commits the US to ending its naval blockade of Iranian ports within 30 days, while Iran would reopen the Strait of Hormuz. But an estimated 5,000 mines placed in the waterway during the conflict threaten to delay the strait's reopening, and Israel has distanced itself from the agreement, adding uncertainty to whether the truce will hold.
The deal includes a $300 billion reconstruction fund for Iran and waives sanctions to let Tehran sell oil during the negotiation period, drawing criticism from Republican Senator Bill Cassidy, who called it a "tremendous foreign policy blunder." President Trump downplayed the agreement's permanence, telling reporters at the Group of Seven summit that the 60-day period "could take longer."
Other Asian markets tracked the Nikkei higher. The broader advance followed a mixed session on Wall Street, where the Dow Jones Industrial Average closed at a record 51,999.67, up 0.6%, while the S&P 500 slipped 0.6% to 7,511.35 and the Nasdaq Composite fell 1.2% to 26,376.34, as technology stocks rotated lower. The Cboe Volatility Index rose 1.3% to 16.41, still below its trailing one-year average.
In cross-asset markets, the US dollar index edged down to 99.29, while the 10-year Treasury yield held at 4.427%. Gold futures ticked up 0.1% to $4,358.62 an ounce, extending a rebound from January highs as investors weighed the implications of lower oil prices on inflation expectations.
Industry officials cautioned that a full return to pre-war production and refining levels in the region is likely to take weeks, months or even years. China's crude oil throughput in May fell 9.1% on the year to the lowest level in almost four years, signaling that refiners were drawing on stockpiles built before the conflict disrupted supply routes.
The next catalyst for markets comes from the official US Energy Information Administration inventory report due later Thursday, which will provide further clarity on domestic crude supply as traders assess whether the Iran truce can hold beyond the initial 60-day window.
This article is for informational purposes only and does not constitute investment advice.
[1] Nikkei tops 71,000 as Asian markets shrug off US-Iran deal risks[2] Asian shares are mostly higher and Japan's Nikkei tops 70,000 before BOJ rate hike - The Washington Post[3] Asian stocks steady, oil lower as US and Iran sign peace deal[4] Oil little changed as investors weigh US-Iran peace deal, Hormuz uncertainty By...[5] Trump signs Iran deal amid criticism
