Asian stock markets experienced a significant surge on Tuesday, echoing a robust rally on Wall Street, as oil prices retreated sharply from recent highs. This rebound comes after steep declines the previous day, with investors cautiously optimistic that the conflict with Iran may not be prolonged.
Market Rebound Amid Volatile Conditions
The gains early Tuesday, however, did not fully recover the substantial losses incurred on Monday. On that day, oil prices had neared $120 per barrel before falling back to approximately $90. U.S. futures were trading about 0.4% lower during the Asian session.
Trump's Comments Influence Investor Sentiment
Helping to assuage investors' fears, U.S. President Donald Trump told CBS News he believes "the war is very complete, pretty much." Nevertheless, he issued other remarks that appeared to threaten intensified action against Iran if it attempts to disrupt the global oil supply.
"Today is the rebound, obviously positive comments from President Trump overnight, we're starting to see the light at the end of the tunnel for the war," said Neil Newman, a managing director and head of strategy at Astris Advisory Japan. "So volatility is going to remain with us but things are certainly looking a lot brighter today."
Regional Market Performances
Japan's benchmark Nikkei 225 added 3.2% to 54,399.08. This surge was supported by revised economic data showing Japan's economy grew at an annual pace of 1.3% in the final quarter of last year, boosted by solid business investments. The initial estimate was a much weaker 0.2%.
Other major Asian indices also posted gains:
- Australia's S&P/ASX 200 gained 0.8% to 8,669.50.
- South Korea's Kospi jumped 3.6% to 5,453.45.
- Hong Kong's Hang Seng added 1.6% to 25,804.70.
- The Shanghai Composite index rose 0.4% to 4,119.29.
Oil Price Dynamics and Market Correlation
Share prices have been swinging mostly in tandem with oil prices, which have gyrated as the war has deepened. Early Tuesday, benchmark U.S. crude fell $4.70 to $90.07 a barrel. Brent crude, the international standard, dipped $5.13 to $93.83 a barrel.
On Monday, U.S. stock prices swerved from a steep early loss to a moderate gain. The S&P 500 dropped as much as 1.5% before flipping to a gain of 0.8%, closing at 6,795.99. The Dow Jones Industrial Average clawed back a plunge of nearly 900 points to rise 239 points, or 0.5%, to 47,740.80. The Nasdaq composite climbed 1.4% to 22,695.95.
Underlying Economic Concerns
Share prices have wavered due to uncertainty about how high oil prices will go and how long they will remain elevated because of disruptions to Middle East energy facilities. If oil prices stay very high for an extended period, households' budgets already stretched by high inflation could break under the pressure.
Companies would see their own bills jump for fuel and to stock items on their store shelves or in their data warehouses. This raises the possibility of a worst-case scenario for the global economy: "stagflation," where growth stagnates and inflation remains high.
Focus on the Strait of Hormuz
Concerns have focused particularly on the Strait of Hormuz, a narrow waterway off Iran's coast through which a fifth of the world's oil sails on a typical day. Iran has threatened to set fire to ships sailing the strait.
If the strait remains closed for only a few weeks, the price of oil could push to $150 per barrel or higher, according to oil and gas strategists at Macquarie Research. Trump also added that when it comes to the Strait of Hormuz, he's "thinking about taking it over," according to CBS.
Bond and Currency Markets
In the bond market, the yield on the 10-year Treasury fell to 4.10% from 4.15% late Friday. Worries about high inflation and oil prices are pushing upward on Treasury yields, and the 10-year yield briefly rose above 4.20% early Monday. Yields then slid late in the day when oil prices eased.
In currency trading early Tuesday, the U.S. dollar edged up to 157.85 Japanese yen from 157.67 yen. The euro cost $1.1611, down from $1.1638.
AP Business Writer Stan Choe in New York and AP Videographer Ayaka McGill in Tokyo contributed to this report.
