Stocks across Asia experienced a downturn on Thursday, reversing initial gains that had briefly pushed Japan’s Nikkei 225 index above the 60,000 mark for the first time. The retreat came as oil prices surged past $100 a barrel, driven by investor anxiety over the uncertain prospects for renewed talks aimed at ending the conflict with Iran. U.S. stock futures also pulled back after major Wall Street indexes had closed at fresh records the previous day, buoyed by robust corporate earnings reports.
Regional Markets React to Geopolitical Uncertainty
Markets in Japan and South Korea had initially touched new record highs, fueled by strong buying in technology shares. However, the momentum faltered. Tokyo’s Nikkei 225 ultimately closed down 1.5% at 58,707.60, after reaching an intraday peak of 60,013.98. South Korea’s Kospi index also gave up earlier gains, ending 0.1% lower at 6,414.57, having briefly surpassed 6,500. South Korea’s economic performance, with a better-than-expected 1.7% annual growth rate for the January-March quarter driven by strong exports, particularly computer chips for the artificial intelligence boom, did little to sustain market optimism.
Hong Kong’s Hang Seng index shed 1.1% to close at 25,865.88, while mainland China’s Shanghai Composite index fell 0.8% to 4,073.71. In Australia, the S&P/ASX 200 declined 0.8% to 8,770.70. Other Asian markets also saw declines, with Taiwan’s Taiex sinking 1.6% and India’s Sensex losing 0.6%.
Oil Prices Spike as Iran Tensions Escalate
The primary driver behind the cautious sentiment and the rise in oil prices appears to be a growing unease regarding the protracted conflict with Iran, now in its eighth week. Despite a ceasefire extension announced by U.S. President Donald Trump, clarity on when or if further peace talks will materialize remains elusive. The situation intensified on Wednesday when Iran reportedly fired on three ships in the Strait of Hormuz, a day after the U.S. initiated a sea blockade of Iranian ports. President Trump indicated the U.S. would continue its blockade.
Maritime traffic through the Strait of Hormuz, a critical chokepoint for global oil supplies, with approximately one-fifth of the world’s oil typically passing through before the conflict, remains largely disrupted. The likelihood of its reopening diminished further after Iran’s Revolutionary Guard reportedly seized two of the three ships that were attacked.
Global energy prices have reacted sharply to this ‘Iran war energy shock.’ Brent crude, the international benchmark, was trading 1.5% higher early Thursday at $103.39 per barrel, a significant jump from around $70 a barrel before the conflict began in late February. U.S. benchmark crude also saw gains, rising 1.8% to $94.66 per barrel.
Market Analysts Point to Supply Disruption Realities
Strategists at ING Bank, Warren Patterson and Ewa Manthey, noted in a research report that as hopes for a resolution between the U.S. and Iran fade and peace talks stall, the oil market is compelled to ‘reprice expectations.’ They added, ‘As hopes fade, the reality of the supply disruption will set in, leaving further upside for prices.’ The analysts cautioned that if no progress is made, the market may become increasingly desensitized to the headlines that have recently dictated price action.
Wall Street’s Record Run Contrasts with Asian Retreat
The divergent performance between Asian markets and Wall Street highlights the impact of localized geopolitical events versus broader corporate performance. On Wednesday, Wall Street extended its record-setting streak, with the benchmark S&P 500 climbing 1% to 7,137.90, surpassing its previous record set on Friday. The Dow Jones Industrial Average advanced 0.7% to 49,490.03, and the Nasdaq composite also achieved a new record, gaining 1.6% to 24,657.57. These gains were attributed to a series of strong corporate earnings reports and the aforementioned extension of the Iran war ceasefire.
Notable corporate performances included GE Vernova, whose shares jumped 13.7% after reporting better-than-expected quarterly profits and benefiting from robust equipment orders for data centers, driven by the AI boom. Boeing saw a 5.5% increase, and Philip Morris International rose 7%, both following positive earnings announcements.
Other Market Movements
In other trading early Thursday, precious metal prices saw declines. Gold prices dropped 0.6% to $4,722.70 per ounce, while silver prices lost 2.3% to $76.17 an ounce. The U.S. dollar strengthened against the Japanese yen, rising to 159.53 yen from 159.48 yen. The euro was trading at $1.1696, down from $1.1705.
