Asian stocks were mixed and oil prices rose after reports said the United States and Iran had agreed to halt attacks on each other after a weekend of attacks that called into question their fragile ceasefire.
Investor confidence remains shaky after last week’s rollercoaster ride that saw markets look to the Middle East crisis and growing concerns about a tech bubble fueled by the AI boom.
While there is an expectation that Washington and Tehran will finalize a deal to end their conflict and reopen the Strait of Hormuz, the process has been fraught with tension between the longtime foes.
The two have traded strikes in recent days, disrupting shipping through the vital waterway and fueling concerns that Iran will close it again.
US Central Command said it had struck 10 Iranian military targets because of “continued Iranian aggression against merchant shipping”.
Iran said it retaliated with attacks against US bases in Kuwait and Bahrain. Both Kuwait and Bahrain denounced the Iranian attacks.
Tehran has been angered by Oman’s announcement of an alternative route through the strait hugging Oman’s coastline, which Muscat said was in conjunction with the International Maritime Organization.
Iran insists on controlling passage through the vital strait, something it did not enjoy before the war.
The two countries agreed to halt attacks on each other, US media reported late Sunday citing senior US officials, and plan to meet on Tuesday in Qatar for more talks.
US President Donald Trump has repeated past threats of military action if Iranian attacks continue, saying on Saturday that Iran “would no longer exist” if the US was “forced” to resume war.
Iran’s top diplomat warned on Sunday that any attempt by ships to bypass its preferred route would “increase tensions”.
A US official said on Sunday: “Technical talks are planned to continue in all areas of the MoU). Both sides will withdraw for now and ships can move freely” in and around the strait.
Oil prices, which last week fell to pre-war levels, rose on Monday, with West Texas Intermediate adding more than one percent.
Stock markets fluctuated, with Hong Kong, Sydney, Wellington, Taipei and Manila rising but Tokyo, Seoul, Shanghai, Singapore and Jakarta falling.
Technology firms were back in the spotlight after heavy losses last week, with South Korean chip makers SK hynix and Samsung taking the brunt of the selling.
The sector has been hit by concerns that valuations have gone too far and questions about when firms will see a return on the trillions of dollars poured into AI.
The tech boom has driven the three major indexes of Seoul, Tokyo and Wall Street to record highs this year, with only SK hynix rising 300 percent in the first six months of the year.
The Bank for International Settlements – considered the central bank of central banks – warned on Sunday of a potential downturn after a long-term investment boom by companies looking to get ahead in the AI race.
“The disappointment in returns could cause a sudden pullback in financing and turn the capital boom into a prolonged investment slump, with possible negative effects on financial conditions,” it said in its annual report.
He added that “a major stock market correction could have greater macroeconomic consequences today than in the past.”
Investors are looking ahead to the release of US jobs data, which could have an impact on the Federal Reserve’s monetary policy plans.
The bank has taken a more hawkish turn amid concerns about rising inflation caused by the war in Iran.
“Last month, strong data triggered a four percent sell-off in the Nasdaq, its worst one-day drop in more than a year, as higher longer-term fears weighed heavily on AI trading,” said IG market analyst Fabien Yip.
“A repeat rally on Thursday could trigger a similar rotation; a miss, by contrast, could dampen growth expectations and boost rate-sensitive stocks.”
– Key figures around 0230 GMT –
Seoul – Kospi: DOWN 1.9 percent to 8254.35
Tokyo – Nikkei 225: DOWN 0.7 percent to 68,869.43 (break)
Hong Kong – Hang Seng Index: UP 1.7 percent to 23,048.81
Shanghai – Composite: UP 0.1 percent to 4,032.52
West Texas Intermediate: UP 1.1 percent to $70.00 a barrel
Brent North Sea crude: up 0.7 percent to $72.47 a barrel
Euro/dollar: UP at $1.1391 from $1.1388 on Friday
Pound/dollar: UP at $1.3208 from $1.3200
Dollar/yen: UP to 161.79 yen from 161.75 yen
Euro/pound: DOWN to 86.25 pence from 86.28 pence
New York – Dow: DOWN 0.1 percent at 51,876.11 (close)
London – FTSE 100: DOWN 0.2 percent to 10,508.02 (close)
