Asian shares firm as AI boom offsets Gulf peace talks setback, oil price rise

SYDNEY: Asian share markets firmed on Monday as the boom in all things AI continued to ​drive demand, offsetting a lack of progress in Gulf peace talks that challenged optimism on a re-opening of the Strait ‌of Hormuz and lifted oil prices.

While negotiators from Washington and Tehran are apparently working to hammer out a deal, President Donald Trump has been notably silent on their progress. Speaking on Saturday, Defense Secretary Pete Hegseth said the U.S. was ready to restart attacks on Iran if a deal could not be reached.

Tensions in the region were not helped ​by an Israeli push further into Lebanon in the battle against the Iranian-backed Hezbollah militant group.

"While uncertainties remain, the acute risk phase for ​the global economy should be over if tankers can begin moving again," said Michael Feroli, head of U.S. ⁠economics at JPMorgan.

"Still, not everything would return to its pre-conflict place - oil prices are likely to remain elevated for some time, as inventories get ​rebuilt and the supply infrastructure in the Middle East is repaired."

Indeed, the lack of news nudged Brent up 1.9% to $92.89 a barrel, while U.S. ​crude added 2.4% to $89.46.

Asian share markets remain underpinned by demand for semiconductors and AI-related gear, with Japan's Nikkei up a further 0.5%, having risen almost 5% last week to all-time highs.

South Korea rose 1.3%, after surging 8% last week, while Taiwan climbed almost 6% last week. MSCI's broadest index of Asia-Pacific shares outside Japan added 0.2%.

Nvidia ​boss Jensen Huang kicks off the Computex trade show in Taiwan on Monday with a speech about AI in which he is expected to ​expound on his company's latest product efforts as well as the island's central role in the industry.

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For Europe, EUROSTOXX 50 futures dipped 0.3%, while ‌DAX futures ⁠eased 0.2% and FTSE futures lost 0.5%.

S&P 500 futures were up 0.2%, while Nasdaq futures firmed 0.4% after hitting records last week.

Yet the gains have been narrowly based with the AI-linked big 10 companies making up 40% of the S&P 500 and only 21 stocks of the 500 making record highs. While tech stocks climbed almost 16% in May, consumer discretionary and healthcare managed little more than 2%, and consumer staples lost more than ​3%.

The inflationary pulse from oil continues ​to hamper bond markets as ⁠U.S. 10-year yields rose 3 basis points to 4.470%. Markets imply a 50-50 chance the Federal Reserve will have to hike rates by year-end to prevent rising prices from getting baked into inflationary expectations.

A host of Fed ​members are set to speak this week, while major data include the ISM survey of manufacturing and ​the May payrolls report ⁠on Friday.

Market forecasts are for a solid rise of 85,000 in employment, keeping the jobless rate steady at 4.3%. Anything stronger would likely see the odds of a hike narrow further.

The market's hawkish outlook has kept the dollar broadly steady, with the Japanese yen and the euro hampered by those regions' ⁠reliance on ​energy imports.

The dollar was a shade firmer on the yen at 159.42 , but bulls ​were wary of risking Japanese intervention on a break of the 160.00 barrier.

The euro stood at $1.1645 , having spent the past week hemmed in between $1.1585 and $1.1661.

In commodity markets, gold was little ​changed at $4,535 an ounce, having found little support as a safe haven or as a hedge against inflation.