Risk-On Again in Asia, Can the Rally Sustain?
Asian markets rallied on Wednesday (April 8th) after US President Donald Trump announced a ceasefire with Iran, sparking a rally in risk assets and pressuring oil prices. Stocks and government bonds rallied in morning trading, while oil prices fell sharply as concerns about commodity-driven inflation began to ease, particularly in Asia, a major energy importer.
Trump agreed to suspend attacks on Iran for two weeks, conditional on the immediate reopening of the Strait of Hormuz, a strategic waterway through which about a fifth of the world's oil passes. The effective closure of this waterway previously not only disrupted oil but also hampered the supply of other commodities such as fertilizer, making it a crucial point in de-escalation efforts. Iran's Supreme National Security Council also reportedly approved the safe passage of ships through the strait and stated that negotiations with the US would begin on Friday.
Oil prices fell back below US$100 per barrel. The front-month WTI contract fell about 14% to US$97.59, while Brent fell 12.5% to US$95.65. Several analysts believe that falling energy prices have the potential to ease consumer pressure and lower inflation expectations, which have been a major drag on equity markets in recent weeks.
However, the market remains cautious. Saxo Markets views this news as constructive as diplomacy is gaining ground, but the real test will be whether the ceasefire develops into a lasting agreement or just a fragile pause. eToro believes investors should avoid excessive euphoria, as the two-week deadline is not a permanent resolution, especially given the pattern of deadlines being set and extended repeatedly in previous political dynamics. If two weeks pass without an agreement, the market is considered vulnerable to a sharp reversal.
In the meantime, risk appetite has returned broadly across the region. Japan's Nikkei rose 4.4% in early trading, South Korea's Kospi surged 5.1% on the back of rising chip stocks, and Australia's S&P/ASX 200 rose 2.5%. Government bonds rallied (yields fell), while most Asian currencies strengthened against the weakening dollar; Bitcoin held above US$70,000, and gold and silver rallied again. The sustainability of this rally, according to analysts, will depend heavily on evidence of the opening of shipping lanes and tangible progress toward resolving the conflict. (asd)
Source: Newsmaker.id
