Financial markets across Asia displayed inconsistent performance Friday as crude oil costs continued climbing, driven by persistent tensions between the United States and Iran that have left investors uncertain about regional stability.
The MSCI Asia-Pacific stock index excluding Japan climbed 0.3% and appeared headed for a weekly increase of 0.8%, while Japan’s Nikkei gained 0.45%. However, markets in South Korea, China and Hong Kong posted declines.
U.S. market futures showed Nasdaq advancing 0.6% and S&P 500 rising 0.1% after Thursday’s cash session closed lower, while European futures pointed to losses with EUROSTOXX 50 down 0.65% and FTSE falling 0.9%.
The inconsistent market performance highlighted investor anxiety as trading this week has alternated between optimism for conflict resolution and concerns about prolonged instability.
“The thing is, a ceasefire is a funny term to use in conjunction with a blockade and rolling tensions and animosities,” explained Vishnu Varathan, who serves as Mizuho’s head of macro strategy for APAC.
Tehran demonstrated its control over the crucial Strait of Hormuz Thursday by releasing footage showing commandos boarding a large cargo vessel from speedboats. Meanwhile, President Donald Trump announced he had directed the Navy to “shoot and kill” Iranian vessels placing mines in the waterway while increasing mine-clearing operations.
These aggressive statements followed Trump’s recent decision to extend indefinitely what was originally planned as a two-week ceasefire with Iran to permit additional diplomatic discussions.
“It’s not going to be a linear de-escalation of violence and oil prices and volatility around the entire supply shock,” Varathan noted.
“(Investors) have just been looking for excuses to put on optimistic trades opportunistically. I don’t think anybody in the market truly believes that this will be over in a week or two.”
Energy markets saw prices increase as the Strait of Hormuz standoff continued. Brent crude futures surged more than 1% to reach $106.21 per barrel, while U.S. crude advanced 1% to $96.77 per barrel.
Investors showed little reaction to news that Lebanon and Israel had agreed to extend their ceasefire for three additional weeks following high-level discussions at the White House.
Currency movements remained relatively subdued Friday, though the dollar was positioned for weekly gains due to renewed demand for safe-haven assets.
The euro traded at $1.1684 and was tracking toward a nearly 0.7% weekly loss, while the British pound held steady at $1.3469 but faced a modest weekly decline.
Multiple central banks including the Federal Reserve, European Central Bank and Bank of England will announce policy decisions next week, with market participants watching closely for commentary on how the conflict might affect inflation and economic growth.
“In view of the demand destruction implied by higher energy prices, there may be an understandable reluctance by many G10 policymakers to push ahead with rate hikes over the coming months,” said Jane Foley, who leads FX strategy at Rabobank.
The Bank of Japan will also convene next week, with expectations that the central bank will maintain current interest rates.
Currency traders focused attention on the yen, which approached the critical 160-per-dollar threshold that many analysts view as likely to trigger government intervention.
The Japanese currency weakened slightly to 159.78 per dollar and was positioned for a 0.7% weekly decline.
Japanese Finance Minister Satsuki Katayama issued fresh intervention warnings Friday, emphasizing “decisive action” in coordination with the United States.
“Lower market liquidity during Golden Week, which comes directly after the BOJ meeting, may provide an opportunity for FX intervention and a knee-jerk appreciation in the yen within the 150–160 range,” explained Carl Ang, a fixed income research analyst at MFS Investment Management.
Japanese markets will close for several days during the annual Golden Week holiday period extending into early May.
Gold prices remained unchanged at $4,691.60 per ounce.
