Asian stock markets surged and oil prices receded dramatically on Friday, boosted by growing optimism that the United States and Iran will reach a deal to end the protracted conflict that has severely hobbled global energy supplies. The shift in sentiment marks a significant reversal from the war-driven anxiety that has gripped markets for weeks.
During Friday morning trading in Asia, the price of Brent crude, the international benchmark, was down 0.9% to hover around $93 a barrel. The primary US benchmark, West Texas Intermediate, shed 1.1% to slide just below the $88 a barrel threshold. The decline in oil prices offered immediate relief to equity markets, with leading indices across the region posting strong gains.
Stock exchanges in Tokyo, Seoul, and Taipei surged by more than 2%, while Sydney’s benchmark advanced by 1%. The rally was more muted in Hong Kong, and Shanghai’s main benchmark bucked the trend, losing 0.4%. The positive momentum in Asia followed a strong lead from Wall Street, where advances on Thursday came despite a raft of gloomy economic indicators.
Economic Crosscurrents and AI-Driven Optimism
The market optimism persisted even as new data painted a complex picture of the US economy. The Federal Reserve’s preferred inflation gauge rose in April to its highest level since 2023, while first-quarter economic growth figures were revised lower. The combination of persistent inflation and slowing growth diminishes the likelihood of imminent interest rate cuts by the Fed, despite repeated political calls for lower rates to stimulate the economy.
Analysts suggested that the easing of geopolitical risks was a primary driver of the rally. “Recession risks are easing as oil prices moderate and the probability of worst-case scenarios fades,” wrote Matthew Martin of Oxford Economics. He added a crucial caveat about the true engine of the equity boom: “While reduced risks from the war have helped, the improvement in equity prices is mostly because of a robust earnings season. The driver is overwhelmingly AI-related capital expenditure.”
This global bullishness on artificial intelligence has powered a historic rally, this week pushing the market capitalisations of chipmakers Micron and SK hynix across the $1 trillion threshold for the first time.
Europe Braces for Trade Talks with China
While Asian markets focused on geopolitics and tech, Europe is bracing for a different kind of confrontation. Observers are awaiting a key gathering of European Union leaders on Friday to discuss strategies for addressing gaping trade deficits with China. EU commissioners are set to hold a debate on what the 27-nation bloc should do to defend its companies from what Brussels describes as unfair competition from Chinese rivals. The outcome of these discussions could set the stage for a new phase in global trade tensions, even as the immediate threat of a wider Middle East conflict appears to recede.
