Asian markets advance as easing Gulf tensions push oil prices lower, reducing inflation concerns and lifting investor sentiment ahead of major central bank meetings, earnings reports and key economic data releases.
Asian equity markets begin the week on a positive note as easing geopolitical tensions in the Gulf trigger a sharp decline in oil prices, easing inflation concerns and improving investor confidence. The retreat in crude prices also supports global bond markets, while investors turn their attention to a busy week featuring major central bank meetings, corporate earnings and key economic indicators.
Investor sentiment improves after signs of de-escalation in the Middle East. Iran indicates that it is prepared to suspend attacks provided the United States refrains from further military action, raising hopes that tensions in the region may stabilise. However, attacks by Yemen’s Houthi forces on Saudi oil facilities along the Red Sea highlight that risks to global energy supplies and shipping routes remain.
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The easing of immediate conflict leads to a significant decline in oil prices. Brent crude falls 4.7% to US$92.27 per barrel, while US West Texas Intermediate (WTI) declines 5% to US$84.89 per barrel. Lower energy prices reduce concerns over inflation, prompting investors to scale back expectations of further interest rate hikes by major central banks.
Attention now shifts to a series of monetary policy meetings. The US Federal Reserve is scheduled to announce its policy decision on Wednesday, with markets assigning roughly a one-in-three probability of a rate increase. While policymakers remain divided, softer US inflation data has strengthened expectations that the Fed may keep interest rates unchanged. The Bank of England and the Bank of Japan are also expected to maintain their current policy settings while closely monitoring inflationary pressures.
Global equity markets respond positively to the improved outlook. Futures linked to the S&P 500, Nasdaq, Euro Stoxx 50, DAX and FTSE all move higher, reflecting stronger risk appetite. In Asia, Japan’s Nikkei 225, South Korea’s benchmark index and the MSCI Asia-Pacific Index also post gains. Chinese equities receive additional support as semiconductor manufacturer CXMT Corp surges during its Shanghai market debut following one of Asia’s largest initial public offerings of the year.
Corporate earnings are expected to remain another key market driver. Nearly one-third of S&P 500 companies are scheduled to release quarterly results, including major technology firms such as Microsoft, Meta Platforms, Amazon, Apple and Qualcomm. Investors will closely assess whether robust earnings can justify continued high valuations, particularly amid growing concerns over substantial investments in artificial intelligence infrastructure.
Economic data releases will further shape market expectations. Investors are awaiting the United States' second-quarter GDP figures, inflation data, employment indicators and consumer confidence reports, alongside eurozone GDP and inflation updates. These indicators are expected to provide fresh insights into the health of the global economy and the future direction of monetary policy.
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Meanwhile, lower Treasury yields support gains in gold, while the US dollar weakens against several major currencies. Singapore’s dollar strengthens after its central bank unexpectedly tightens monetary policy, whereas Indonesia’s rupiah comes under pressure following the resignation of the country’s central bank governor, raising investor concerns over policy continuity.
Overall, easing geopolitical tensions, declining oil prices and expectations of stable monetary policy have improved global market sentiment. However, investors remain cautious as central bank decisions, corporate earnings and macroeconomic data are expected to determine the direction of financial markets in the coming weeks.