Asian stocks rebound as oil eases on Middle East mediation hopes

SINGAPORE: Asian stocks ended a three-session losing streak on Tuesday as oil prices retreated from a one-month high on hopes of Middle East mediation, while investors prepared for corporate earnings that could test confidence in the artificial intelligence trade.

MSCI’s broadest index of Asia-Pacific shares outside Japan rose more than 2%. Japan’s Nikkei gained nearly 3%, while South Korea’s KOSPI advanced 4.5%.

US stock futures also rose sharply, while European futures slipped 0.2%, indicating a subdued opening.

Brent crude futures fell 0.74% to $88.56 per barrel after touching a one-month high of $91.42 in the previous session.

The decline followed reports that Iran had received a proposal from mediators for a 10-day ceasefire aimed at laying the groundwork for a lasting agreement to end the war that began with US-Israeli attacks on Iran on February 28.

However, risks remained elevated after Yemen’s Iran-aligned Houthis announced plans to impose a naval blockade on Saudi Arabia, potentially disrupting energy supplies as attacks between the United States and Iran intensified.

ATFX Global Chief Market Strategist Nick Twidale said investors appeared to be maintaining an optimistic view in the hope of an outcome similar to earlier de-escalation efforts, although concerns about a broader regional conflict were increasing.

Saxo Chief Investment Strategist Charu Chanana described the gains as a relief rally rather than a clear signal that risks had passed.

She said the rebound could continue if oil prices remained contained and technology earnings supported current expectations for artificial intelligence spending, but both conditions remained uncertain.

Investor attention this week will centre on earnings from Alphabet and Intel, which are expected to provide further indications about the impact of the conflict and the sustainability of the AI-driven market rally.

Strong results from Samsung Electronics and TSMC in recent weeks failed to meet elevated investor expectations, highlighting the pressure on technology companies to deliver rapid profit growth.

HSBC Chief Asia Economist Fred Neumann said demand for AI hardware remained strong, but high earnings expectations had made the sector vulnerable to even modest downward revisions.

He added that rising energy costs and higher interest rates were creating a more difficult economic environment, including for AI-related hardware companies.

Escalating US-Iran tensions have renewed inflation concerns and pushed US Treasury yields higher. The two-year Treasury yield stood at 4.206% during Asian trading after rising four basis points on Monday.

Traders are pricing in 33 basis points of US interest rate increases this year.

The dollar remained stable against most major currencies, supported by safe-haven demand. The euro traded at $1.14145, while the Japanese yen stood at 162.51 per dollar, keeping markets alert to possible intervention by Tokyo.

Sterling remained under pressure at $1.344 after comments by Andy Burnham, Britain’s seventh prime minister in a decade, raised concerns about fiscal policy.

Burnham said he would retain the previous government’s fiscal rules while using any available flexibility within them.