Asian stocks climbed to their highest level in six weeks on Wednesday and oil prices extended their decline below $100 a barrel after Donald Trump said US-Iran peace talks could resume in Pakistan within days, calming markets rattled by weeks of conflict-driven volatility.
Mr Trump said negotiations could restart in the next two days after weekend talks collapsed, prompting Washington to impose a blockade on Iranian ports.
Pakistani and Iranian officials also said that negotiations could restart.
The signs of renewed diplomatic engagement pushed Brent crude futures down 0.7 per cent to $94.13 a barrel, having already slumped almost 5 per cent overnight.
Stock markets also responded positively. MSCI’s broadest index of Asia-Pacific shares outside Japan gained about 1.5 per cent, Japan’s Nikkei climbed 1.2 per cent to 58,561, closing in on its record high of 59,332 from late February, and Hong Kong’s Hang Seng gained 1.2 per cent. Chinese blue-chips rose 0.5 per cent.
“The impressive price action in risk assets suggests markets are keen to look through the immediate impact of the Middle East conflict,” Tony Sycamore, an analyst at IG told Reuters. “There is a growing expectation that the standoff will soon be resolved, allowing the US administration to pivot towards declaring victory, before stimulating the economy ahead of the midterms.”
Overnight on Wall Street, Nasdaq climbed 2 per cent to chalk up its 10th straight day of gains and the S&P 500 flirted with a record closing high.
US producer inflation data offered some reassurance, with prices rising by less than economists had expected in March, helping ease fears around war-driven inflation.
The US dollar steadied after falling for seven consecutive sessions, with the euro holding at $1.1791 having hit a six-week high of $1.1811 overnight.
Gold added 0.1 per cent to $4,846 an ounce. Investor optimism also supported US Treasuries, which had been under pressure from inflation concerns, with the 10-year yield coming down to 4.2439 per cent.
But with the Strait of Hormuz still effectively shut to oil traffic, the International Monetary Fund on Tuesday lowered its global growth outlook and warned the world economy could reach the brink of recession if the conflict worsened.
Data from maritime intelligence firms shows the blockade is in its first full day of active enforcement but is yet to halt high-risk vessel activity. Just six vessels crossed the strait on Tuesday, down from 14 the previous day, according to Kpler, which noted that confidence among shipowners remained weak with uncertainty around enforcement, insurance constraints and counterparty exposure continuing to weigh on transit decisions.
Windward, another maritime intelligence firm, said sanctioned and falsely flagged vessels were still testing the blockade’s limits, with two such tankers observed crossing the strait on Tuesday despite active enforcement.
One vessel went dark after going through and called at an Iranian port without transmitting its location.
At least 11 tankers carrying around 20 million barrels of Iranian oil were positioned off Malaysia in a ship-to-ship transfer hub, Windward said, suggesting Iran was increasingly routing oil flows through indirect channels rather than directly through the strait.