Asian shares advance as markets await signals on when the war with Iran may end

Asian markets rallied Tuesday amid ongoing tensions in the Middle East, as investors remained cautious about potential impacts on global oil supply chains and economic stability.

The Nikkei 225 in Tokyo jumped 2.1% to 55,387.75, while South Korea’s Kospi surged an impressive 3.5% to 5,724.30. Taiwan’s benchmark performed even better, climbing 3.9%. Other regional markets showed more modest gains, with Hong Kong’s Hang Seng adding 0.3% to 26,039.23 and the Shanghai Composite inching up 0.1% to 4,127.34. Australia’s S&P/ASX 200 rose 0.5% to $8,738.50.

The upward movement in Asia contrasted with Monday’s performance on Wall Street, where the S&P 500 dipped 0.2% to 6,781.48 and the Dow Jones Industrial Average fell 34 points to 47,706.51. The Nasdaq composite barely moved, edging higher by less than 0.1% to 22,697.10.

Market volatility has been driven primarily by dramatic swings in oil prices, which have receded significantly from Monday’s peaks. Brent crude, the international benchmark, traded at $85.36 per barrel early Wednesday, representing an 11% drop from its previous settlement. U.S. benchmark crude stood at $83.81 per barrel, a substantial retreat from Monday’s high of nearly $120 per barrel—a level not seen since 2022.

The recent oil price spike had triggered widespread concern about potential disruptions to global energy flows, particularly through the strategically critical Strait of Hormuz. Approximately one-fifth of the world’s oil passes through this narrow waterway off Iran’s coast on a typical day, making it a vital artery for global commerce.

Market sentiment received a temporary boost after President Donald Trump told CBS News that he believes “the war is very complete, pretty much,” suggesting the conflict might end relatively soon. However, this optimism has been tempered by escalating rhetoric from both sides as the conflict enters its eleventh day.

U.S. Defense Secretary Pete Hegseth has promised the most intense strikes yet against Iranian targets, while Pentagon officials detailed mounting injuries among U.S. troops. Meanwhile, American forces reportedly neutralized more than a dozen Iranian minelaying vessels on Tuesday.

The Islamic Republic has responded with a threat to block the region’s oil exports, claiming it would not allow “even a single liter” to be shipped to its enemies—a move that could severely disrupt global energy markets if implemented.

President Trump has been unambiguous about U.S. intentions regarding the Strait of Hormuz, writing on his social media platform: “If Iran does anything that stops the flow of Oil within the Strait of Hormuz, they will be hit by the United States of America TWENTY TIMES HARDER than they have been hit thus far.”

Financial analysts note that stock markets typically recover relatively quickly from military conflicts, provided oil prices don’t remain elevated for extended periods. The current uncertainty has triggered dramatic market swings globally, often changing direction hour by hour.

The primary concern for economists is the potential for persistently high energy prices to damage already strained household budgets and raise costs for businesses across supply chains. These pressures could potentially trigger “stagflation”—a dreaded economic scenario combining stagnant growth with high inflation.

Currency markets showed minimal movement early Wednesday, with the dollar trading at 158.26 Japanese yen, virtually unchanged from 158.23 yen previously. The euro strengthened slightly to $1.1625 from $1.1610.

Investors remain focused on energy markets and geopolitical developments in the coming days, as any significant escalation or de-escalation of tensions could trigger further volatility across global financial markets. Analysts suggest maintaining defensive positions until clearer signs emerge about the conflict’s trajectory and its potential impacts on global energy supplies.