Asian markets experienced a dramatic rally on Friday as President Trump claimed there was a breakthrough in talks to end the Iran war, marking a significant shift from earlier military threats. Trump asserted that the US had made 'a great settlement of the war with Iran,' adding that an extension of the shaky ceasefire between the two sides could be finalized 'in the next few days.' The president told reporters that 'Iran will never have a nuclear weapon' under the proposed deal. This development represents a tangible shift from previous optimistic statements that failed to yield results. Ray Attrill, head of FX strategy at the National Australia Bank, noted that "This does look perhaps a bit more tangible than we have had." The deal would mark the most significant diplomatic breakthrough yet to end the war that has sent global energy prices sharply higher and forced the European Central Bank to raise interest rates for the first time in nearly three years to combat war-driven inflation.
Oil markets experienced a sharp reversal as Brent crude fell more than 4% after Trump claimed progress in Iran war talks. Benchmark US crude shed 2% to $85.92 a barrel, though both remain significantly higher than the roughly $70 a barrel level they were at before the war began in late February. ING commodities analysts Warren Patterson and Ewa Manthey noted that "There does appear to be more positive noise around the deal this time," while cautioning that "we would be cautious about assuming that the extension of the ceasefire is a done deal." The oil price decline reflects reduced geopolitical tensions and expectations of increased supply, with the deal potentially ending the three-month-old war that has driven energy prices higher. Spot gold rose 0.2% to $4,222 an ounce, following a 3.5% jump overnight, while spot silver rose 0.3% to $67.52 an ounce, as precious metals caught relief from the lower dollar.
Asian markets staged a strong recovery with South Korea's Kospi jumping 4.6% to 8,123.62, narrowing losses from earlier this month. Samsung Electronics, South Korea's most valuable company, advanced 7.9%, while computer chipmaker SK Hynix rose 2.3%. Tokyo's Nikkei 225 gained 2.8% to 66,020.04, also led by gains for technology stocks including SoftBank Group up 1.5% and chip equipment maker Tokyo Electron jumping 7.3%. Hong Kong's Hang Seng gained 1.9% to 24,658.91 and the Shanghai Composite index rose 1.1% to 4,031.51. In Australia, the S&P/ASX 200 closed 1.4% higher at 8,804.00, while Taiwan's Taiex gained 2.4% and India's Sensex advanced 1.4%. US equity futures also edged higher in Asian trading, with S&P 500 futures rising 0.2% and Dow Jones futures gaining 0.4%.
Wall Street main indexes staged a comeback as investors looked for bargains after Friday's selloff when the heavyweight technology sector put pressure on the entire market. The S&P 500 rose 1.8% to 7,394.30, back to where it was in early May, while the Dow Jones Industrial Average rallied 1.9% to 50,848.75. The technology-heavy Nasdaq composite climbed 2.5% to 25,809.66. The S&P 500 technology index finished up 1.5% on Monday after tumbling 5.8% on Friday. According to Reuters, Bruce Zaro, managing director at Granite Wealth Management, noted that "the profit takers did their work on Friday, new buyers have come in and said, that was overdone." The sector had suffered its largest daily decline since April 2025 after a hot May jobs report fueled fears the U.S. Federal Reserve would need to raise interest rates. Advances in Asia came after Wall Street gauges recovered, with chipmakers such as Nvidia Corp. and Micron Technology Inc. climbing. Investors were also awaiting the debut Friday on Wall Street of SpaceX, Elon Musk's rocket company, which is set to become the largest initial public offering (IPO) on record, raising around $75 billion.
The peace deal hopes have significantly altered market expectations for Federal Reserve policy. Treasuries gained as hopes of a peace deal led markets to trim bets of a rate hike from the Federal Reserve this year, with traders having pushed back expectations for any further US interest-rate increase. Two-year Treasury yields were steady at 4.066% on Friday, having slumped 6 basis points overnight, while the benchmark 10-year Treasury yields held at 4.4631%, after falling almost 8 bps overnight. The dollar index, which measures the greenback against its major peers, held at 99.78, having lost 0.4% overnight. Data showed that U.S. producer prices increased more than expected in May, leading to the largest annual gain in 3-1/2 years as the Middle East conflict drove up energy prices. The resolution of Middle East tensions could provide significant relief to global markets that have been volatile due to geopolitical uncertainties, though despite the improved market mood, uncertainty remains over the timing of any agreement, as Iranian media reported that Tehran had not yet approved the text of a proposed deal with the United States. ING analysts noted that "Trump has said many times before that a deal is very close, only for hostilities to resume," while acknowledging "there does appear to be more positive noise around the deal this time."
