Asian stocks retreated from record highs on Friday, while crude oil prices increased amidst escalating tensions in West Asia, raising concerns over energy supplies and the sustainability of the recent equity rally.
The MSCI Asia Pacific Index dropped by 1.1 percent as hostilities between the U.S. and Iran intensified, igniting fears that rising energy costs could hinder economic growth. Despite this decline, the index is poised for a fifth consecutive week of gains, the longest winning streak since January.
Brent crude oil rebounded more than 1 percent, surpassing $101 per barrel, following three consecutive days of losses. This increase is primarily due to fears that a prolonged closure of the Strait of Hormuz might disrupt oil and gas supplies. However, the commodity has experienced a decline of over 6 percent throughout the week.
U.S. stock-index futures showed some resilience, recovering from earlier losses to gain 0.2 percent. This followed American military responses to Iranian attacks on naval destroyers in the Strait of Hormuz on Thursday. President Donald Trump threatened stronger action against Iran if the country did not agree to a deal promptly, describing the military response as a “love tap” in an interview with ABC News, while asserting that a ceasefire remained “in effect.”
Though Asian stocks dipped from their highs, they are still on track for one of their best weeks this year. Investors appeared to remain optimistic as they focused on U.S. efforts to de-escalate tensions, banking on the notion that calmer political climates could stabilize energy prices and favor broader market risks.
“Equities are looking through the war while oil continues to hold its war premium,” noted Hebe Chen, a senior market analyst at Vantage Global Prime in Sydney. “That’s a disconnect that suggests markets believe the worst-case scenario is fading, even if a resolution isn’t finalized.”
In currency markets, the dollar edged higher for a second day after previously retreating to pre-war levels amid optimism that the U.S.-Israel conflict with Iran was nearing resolution. Bonds came under pressure, with the 10-year Treasury yield holding steady at 4.39 percent due to inflation concerns fueled by elevated oil prices. Gold prices increased slightly to approximately $4,700 per ounce.
To mitigate the crisis, President Trump had launched “Project Freedom,” aimed at facilitating transportation through the Strait of Hormuz, though the initiative was abruptly suspended later. According to the Wall Street Journal, Saudi Arabia and Kuwait have lifted restrictions on U.S. military operations at regional bases, potentially enabling the Trump administration to restart efforts to ease traffic in the strait.
Washington awaits Tehran’s response to its proposal for reopening the strait amid ongoing tensions in both the Persian Gulf and Lebanon. An Iranian official indicated that the country would not accept a reopening plan deemed “unrealistic,” as reported by Press TV.
“Investors are now anticipating some resolution in the coming month regarding the Iran situation or Strait of Hormuz,” stated Jun Bei Liu, co-founder of hedge fund Ten Cap Investment Management. “In the near term, volatility may continue, but the market is likely to favor buying opportunities unless a new crisis escalates.”
In economic news, a federal trade court ruled that Trump’s 10 percent global tariffs were unlawful, presenting a fresh obstacle to the administration’s economic agenda and its efforts to impose tariffs without congressional input.
Despite the decline in stocks signaling a downbeat end to the Asian trading week, regional equities had reached record highs throughout the preceding four sessions. The Kospi index was identified as the world’s top-performing gauge in 2026, driven by speculation that South Korean corporations will enhance earnings as key players in the artificial intelligence sector.
“Market gains have been rapid with few driving factors, making them susceptible to profit-taking in response to negative news,” explained Yugo Tsuboi, chief strategist at Daiwa Securities Co. “I don’t believe the optimism surrounding potential agreements built over the past week will completely dissipate due to this setback.”
Market Highlights:
Stocks:
- S&P 500 futures rose by 0.2 percent as of 10:45 a.m. Tokyo time.
- Japan’s Topix fell by 0.8 percent.
- Australia’s S&P/ASX 200 declined by 1.6 percent.
- Hong Kong’s Hang Seng fell by 1.2 percent.
- The Shanghai Composite dropped by 0.1 percent.
- Euro Stoxx 50 futures decreased by 0.8 percent.
Currencies:
- The Bloomberg Dollar Spot Index remained stable.
- The euro remained steady at $1.1730.
- The Japanese yen was unchanged at 156.90 per dollar.
- The offshore yuan held at 6.8053 per dollar.
Cryptocurrencies:
- Bitcoin fell by 0.1 percent to $79,765.88.
- Ether also decreased by 0.1 percent to $2,285.75.
Bonds:
- The yield on 10-year Treasuries remained at 4.39 percent.
- Japan’s 10-year yield held steady at 2.475 percent.
- Australia’s 10-year yield rose five basis points to 4.97 percent.
Commodities:
- West Texas Intermediate crude increased by 1.2 percent to $95.98 a barrel.
- Spot gold climbed 0.6 percent to $4,713.17 an ounce.
This article was produced with assistance from Bloomberg Automation.
