Japan and South Korea Stocks Surge to Record High as Geopolitical Thaw Pushes Oil Lower

Japan and South Korea Stocks Surge to Record High as Geopolitical Thaw Pushes Oil Lower​

Asian equity markets rallied sharply on Friday, with shares in Japan and South Korea reaching record highs. This surge was fueled by optimism surrounding peace developments in the Middle East. The resumption of oil flows through the Strait of Hormuz helped ease inflation concerns globally.

Japan's Nikkei gained 0.8%, marking its fifth consecutive session at a new record high, extending its weekly gain to 8.5%. South Korea saw a robust jump of 3.1%, contributing significantly to its impressive weekly rise of 15.3%.

Global Markets Surge as Strait of Hormuz Reopens​

Oil tanker traffic has resumed through the Strait of Hormuz. This occurred after the United States lifted its blockade on Iran, following an interim deal intended to conclude a three-month period of war. Brent crude futures responded to the news, dropping 1% to $79.03 a barrel and declining 9.5% for the week.

Despite the market's optimism regarding transit resumption, analysts have issued warnings concerning future governance. A senior geo-economics analyst at the Commonwealth Bank of Australia noted that Iran is unlikely to relinquish control over the strait. The transit guarantee was only guaranteed for 60 days. This development could undermine international norms on free navigation, according to the same analysis.

Fed Outlook Drives Robust US Dollar Strength​

The U.S. dollar experienced significant strength, hovering near a 13-month high against major peers. This movement reflects a sharp repricing of the Federal Reserve rate outlook following its recent meetings. Nine out of 19 officials signaled that higher borrowing costs are likely within this year.

This hawkish pivot led markets to price in multiple rate hikes before the end of the year. The dollar's strength sent repercussions across international currency markets, pushing the Japanese yen to 161.26 a dollar. This level is considered by many as a critical point for potential intervention by Japanese authorities.

Treasury Yield Curve Flattens Amid Rate Expectations​

The bond market reacted strongly to the anticipated rate path from the Fed. Two-year U.S. Treasury yields rose by 9 basis points this week, settling at 4.1790%. This reflects expectations of higher future policy rates.

Conversely, longer-dated bonds saw relief as oil prices declined and the central bank maintained a steady course despite political pressure. Ten-year yields were down 3 bps to 4.4510%, while the 30-year yields slumped 7 bps to 4.9010%, reaching one of their lowest points in two months.

Commodity Prices Wobble on Greenback Rally​

Precious metals faced downward pressure due to the strengthening U.S. dollar. Spot gold slipped by 0.5% to $4,188 an ounce. Spot silver also fell by 0.8%, trading at $65.30 an ounce.

In other market news, Wall Street futures slipped 0.2% following overnight rallies. Intel shares jumped 10% to a record high after U.S. President Donald Trump stated that Apple agreed to collaborate with Intel on chip design and manufacturing in the United States.