Asian equities trimmed earlier losses on Friday as easing oil prices offered some relief, although concerns over a prolonged energy crisis continued to weigh on sentiment.
Investor confidence improved slightly after Donald Trump extended the deadline for potential U.S. strikes on Iranian energy infrastructure by 10 days, following an earlier delay. The move helped calm immediate fears of escalation, even as uncertainty surrounding the conflict persists.
Brent crude futures declined 0.7% to $107.23 per barrel after surging nearly 6% in the previous session. Lower oil prices supported risk appetite, with Wall Street futures rising 0.6%, despite the Nasdaq Composite dropping 2.4% overnight and entering correction territory. Europe’s EUROSTOXX 50 futures also advanced 0.7%.
However, geopolitical risks remain elevated. Reports that the U.S. may deploy additional troops have heightened fears of a broader ground conflict, while uncertainty continues over whether the Strait of Hormuz will reopen fully to global shipping. Meanwhile, Iran has rejected the U.S. ceasefire proposal, calling it “one-sided and unfair.”
Regionally, MSCI’s Asia-Pacific index excluding Japan fell 0.7%, recovering from steeper earlier declines but still marking a 2.3% loss for the week—its fourth consecutive weekly drop. Japan’s Nikkei slipped 0.1%, though it remained marginally higher for the week.
Chinese markets, however, showed resilience. The CSI 300 index rose 0.7%, while Hong Kong’s Hang Seng index also gained 0.7%, outperforming regional peers.
On the policy front, Norges Bank signaled a shift toward tighter monetary policy, warning of rising inflation risks and indicating potential rate hikes later this year—contrasting with earlier expectations of rate cuts.
Bond markets reacted to renewed inflation concerns driven by elevated oil prices. Japan’s 10-year yield climbed 8.5 basis points to 2.36%, while Australia’s 10-year yield jumped 11 basis points to 5.119%. U.S. two-year Treasury yields held near 3.98% after rising sharply, with markets now pricing in roughly a 50% probability of a rate hike by the Federal Reserve in September.
In currency markets, the U.S. dollar eased slightly after three consecutive sessions of gains. The Australian dollar rebounded 0.2% to $0.6905 after hitting a two-month low earlier in the session. The euro edged up to $1.1544, while the Japanese yen hovered near 159.6 per dollar, with traders closely watching the 160 level for potential intervention signals.
