Asian stock markets faced challenges on Friday, while oil prices continued their upward trajectory amid a fragile ceasefire in the ongoing conflict in the Middle East and stalled peace negotiations between the U.S. and Iran, leaving investors with little optimism.
The MSCI Asia-Pacific index, excluding Japan, saw a slight increase of 0.3%, positioning it for a 0.8% gain by the end of the week. In contrast, Japan’s Nikkei index rose by 0.45%, while markets in South Korea, China, and Hong Kong experienced declines.
Futures for the Nasdaq and S&P 500 climbed by 0.6% and 0.1%, respectively, following a drop in the previous cash session. Conversely, EUROSTOXX 50 futures fell by 0.65%, and FTSE futures decreased by 0.9%.
This mixed performance highlighted the uneasy sentiment among investors, who oscillated between optimism for a swift resolution to the conflict and concerns about its potential prolongation.
“The term ceasefire can be misleading, especially in the context of ongoing blockades and escalating tensions,” commented Vishnu Varathan, head of macro strategy for Mizuho in the Asia-Pacific region.
On Thursday, Iran showcased its increased control over the vital Strait of Hormuz by releasing footage of commandos boarding a large cargo ship. In response, U.S. President Donald Trump announced that he had instructed the Navy to “shoot and kill” Iranian vessels that were laying mines in the strait, and to intensify demining efforts.
Trump’s remarks followed his earlier statement about extending a ceasefire with Iran to facilitate further discussions on peace.
“The de-escalation of violence and fluctuations in oil prices will not follow a straightforward path,” Varathan added.
“Investors are eagerly looking for reasons to engage in optimistic trading, but there is a general belief that a resolution will not arrive in the near future.”
In the oil market, prices surged as tensions in the Strait of Hormuz continued. Brent crude futures rose over 1% to $106.21 per barrel, while U.S. crude increased by 1% to $96.77 per barrel.
Despite the market’s focus on broader geopolitical issues, news that Lebanon and Israel had agreed to extend their ceasefire for an additional three weeks after a high-level meeting at the White House was largely overlooked.
Meanwhile, currency movements were relatively subdued on Friday, although the U.S. dollar was poised for a weekly gain due to increased safe-haven demand.
The euro traded at $1.1684, indicating a weekly loss of nearly 0.7%, while the British pound remained stable at $1.3469, also projected to experience a slight weekly decline.
Next week will bring policy announcements from several major central banks, including the U.S. Federal Reserve, the European Central Bank, and the Bank of England, with investors keenly observing their perspectives on the conflict’s effects on inflation and economic conditions.
“Given the demand destruction stemming from rising energy prices, G10 policymakers may be hesitant to pursue rate increases in the upcoming months,” stated Jane Foley, head of FX strategy at Rabobank.
The Bank of Japan (BOJ) is also scheduled to meet next week, with expectations that it will maintain its current interest rates.
In anticipation of this meeting, traders were closely monitoring the yen, which hovered near the significant threshold of 160 per dollar, a level seen as a potential trigger for market intervention. The Japanese currency was slightly weaker at 159.78 per dollar, indicating a projected weekly loss of 0.7%.
Japanese Finance Minister Satsuki Katayama reiterated warnings regarding possible currency intervention, emphasizing the need for “decisive action” in coordination with the United States.
“Diminished market liquidity during the Golden Week holiday, which follows the BOJ meeting, might create an opportunity for FX intervention, potentially leading to a rapid appreciation of the yen within the 150–160 range,” noted Carl Ang, a fixed income research analyst at MFS Investment Management.
During the annual Golden Week holiday, which extends into early May, markets will be closed on several days.
In other markets, spot gold remained stable at $4,691.60 per ounce.
