Asian Stocks Jump to Three-Week High After Iran War Ceasefire

SadaNews - Oil prices fell at their largest pace in nearly six years, while Asian stocks jumped after the United States and Iran agreed to a two-week ceasefire, providing markets with a respite from the turmoil caused by the conflict in the Middle East.

West Texas Intermediate crude dropped by as much as 19% after U.S. President Donald Trump agreed to suspend bombing Iran, a move that will help resume oil flows through the Strait of Hormuz.

Iran stated that safe passage through the waterway would be possible during this period. The global benchmark Brent crude also fell 12% to $95.96 a barrel.

Stock Recovery and Dollar Decline with Improved Sentiment

The MSCI Asia-Pacific Index jumped 4.2% to its highest level in three weeks, as traders bet that lower oil prices would help contain inflation and boost economic growth.

Futures for Wall Street indices rose more than 2% in Asian trading, and European futures surged 5%.

U.S. Treasury bonds rose, encouraged by the decrease in price pressures, prompting traders to re-evaluate bets on an interest rate cut by the Federal Reserve. The dollar index, which had emerged as a safe haven during the conflict, dropped by 0.7%, while gold prices increased.

Markets Watch for Ceasefire Durability and Energy Flows

The proposed ceasefire, announced just hours before Trump threatened to escalate bombings against Iran, has revived risk appetite following disruptions that led to a decline in stocks and pushed several indicators into correction territory since the start of the Middle East war six weeks ago.

Analysts noted that the continuation of relief across various asset classes would require confirmation of the ceasefire's durability, along with a return of energy flows through the Strait of Hormuz to normal levels.

Hiroyuki Ueno, chief strategist at Sumitomo Mitsui Trust Asset Management in Tokyo, remarked that "for now, this represents relief for markets; things have calmed down." He added, "But there’s no guarantee that things will run smoothly from here, and investors should not rush to be optimistic."

Trump's Deadline Gives Time for a Longer Agreement

Trump announced the agreement on Tuesday via social media, hours after Pakistan, which is mediating the talks, urged him to retract a deadline he had set for launching a broad campaign of destruction in Iran if its demands were not met.

The agreement gives both sides time to reach a longer agreement to end the war, which has resulted in thousands of casualties and sparked a global energy crisis.

Trump's decision marks a significant retreat from a previous post that same day, in which he warned that "a whole civilization would die tonight and would never return" if Iran did not comply.

Matthew Haupt, a fund manager at Wilson Asset Management in Sydney, said, "This is a good outcome considering the alternatives, as it shows a willingness to get something done." He added, "It also indicates that we might have avoided the worst-case scenarios."

Iranian Foreign Minister Abbas Araghchi stated in a post on the X platform that safe passage through the Strait of Hormuz would be possible through coordination with the Iranian armed forces, "considering technical constraints."

Garfield Reynolds, head of Bloomberg Markets Live in Asia, noted that "the sustainability of these initial rapid gains will depend on whether the attacks will actually subside and on the course of talks, assuming they commence on Friday in Islamabad."

Currencies and Bonds Move Strongly

Elsewhere, the cost of insuring against default on investment-grade Asian corporate debt fell by at least six basis points on Wednesday, according to traders.

The Chinese yuan also rose to its highest level in three years as the Middle East ceasefire eased geopolitical tensions.

The U.S. Treasury yield curve steepened, as the fall in oil prices bolstered expectations that slowing inflation would pave the way for the Federal Reserve to cut interest rates.

The yields on two-year notes, sensitive to monetary policy, declined by six basis points to 3.73%, while yields on ten-year notes fell four basis points to 4.25%.

One-day interest rate swaps indicated a 60% chance of a cut by the Federal Reserve by the end of the year, compared to a near-zero probability earlier this week. Markets had priced in more than two rate cuts before the U.S. and Israel attacked Iran in late February.

Ken Crompton, head of interest rate strategy at National Australia Bank, stated, "There is room for further upside in the near term." He added, "The market may reassess the probability slightly higher for a rate cut by the Federal Open Market Committee versus current levels."

Gold Soars and Volatility Continues

Gold surged 2.1% to exceed $4800 per ounce, benefiting the non-yielding metal from a low-interest-rate environment. Silver also jumped 4.5% to surpass $76 per ounce.

Wall Street traders were on high alert, monitoring every development in the Middle East and the often unpredictable messages from Trump.

One technical indicator, the daily trading volume in the State Street SPDR S&P 500 ETF Trust, surpassed $60 billion, a level seen as a "panic" indicator according to Bloomberg Intelligence analysts, occurring 29 times this year.

This new milestone is compared to 28 times during the entire year of 2025, according to Athanasios Psarofaghis from Bloomberg Intelligence.

Nick Twidale, senior market analyst at AT Global Markets, stated, "We should note that we may see more volatility with any new news. These are large moves in the markets, and further volatility is expected today."