Asian stocks experienced a slight uptick on Wednesday, while crude oil prices hovered near multi-week lows. Investors were encouraged by a ceasefire between Israel and Iran, viewing it as an opportunity to venture back into riskier assets while diminishing immediate concerns regarding energy disruptions. The U.S. dollar remained near a four-year low against the euro, as two-year Treasury yields fell to their lowest level in a month and a half.
The decline in oil prices alleviated some inflation concerns, reducing risks associated with bonds. Although the ceasefire is fragile, Israel has indicated it will respond decisively to Iranian missile strikes that followed President Donald Trump’s announcement of escalating tensions. U.S. airstrikes did not significantly impair Iran’s nuclear capabilities, with a preliminary intelligence report suggesting only a temporary setback, contradicting Trump’s earlier claims of a complete destruction of Iran’s program.
In market movements, Japan’s Nikkei rose by 0.3%, Australia’s benchmark inched up by 0.1%, and Taiwan’s index saw an increase of 0.9%. The Hong Kong Hang Seng climbed by 0.8%, while mainland Chinese blue chips gained 0.5%. The MSCI index of global stocks maintained its position after reaching a record high previously.
Despite the ongoing conflict between Israel and Iran, market analyst Kyle Rodda noted that traders appeared mostly unconcerned, focusing instead on broader geopolitical risks and the potential for U.S. involvement rather than the current air strikes. U.S. stock futures indicated a modest increase after a significant surge in the S&P 500, and European STOXX 50 futures also advanced slightly. Brent crude prices increased by 83 cents to $67.97 per barrel, recovering from a notable drop in the previous sessions, while U.S. West Texas Intermediate crude followed suit.
As Federal Reserve Chair Jerome Powell indicated possible inflation raises due to higher tariffs, investors remained focused on U.S. monetary policy, with consumer confidence data reflecting softening labor market conditions. Rates for potential Fed cuts were calculated at a 19% probability for July.