Key facts
- US and Iran signed an initial agreement to end hostilities, with a 60-day negotiation period for a final nuclear deal.
- Sanctions on Iran are waived, allowing the country to sell oil freely.
- Asian stock markets, particularly in Japan and South Korea, surged to record highs.
- Oil prices fell below $80 a barrel, with Brent crude at $78.31 and U.S. benchmark crude at $74.75.
- US markets retreated Wednesday due to Federal Reserve projections indicating potential interest rate hikes in 2026.
Asian stock markets surged on Thursday, with benchmarks in Japan and South Korea reaching fresh records, following the initial signing of an agreement between the U.S. and Iran to end hostilities. The deal includes waiving sanctions on Iran, which is expected to allow the country to sell its oil freely, potentially increasing global supply and contributing to a fall in oil prices below $80 a barrel.
The rally in Asia contrasted with a retreat on Wall Street the previous day, driven by speculation that the Federal Reserve might raise interest rates later this year to combat inflation. U.S. stock futures showed gains early Thursday.
The agreement between the U.S. and Iran initiates a 60-day negotiation period for a final deal concerning Iran's nuclear program. As an interim measure, Tehran will dilute its stockpile of highly enriched uranium. The waiver of U.S.-backed sanctions is a significant concession from Washington, according to details released by both nations.
In Tokyo, the Nikkei 225 index rose 1.9% to 71,233.35, surpassing 70,000 for the first time this week, buoyed by hopes for an end to the war and strong performance in high-tech stocks linked to the artificial intelligence boom. South Korea's benchmark index also set a record, gaining 0.6% to 8,917.31. Taiwan's Taiex jumped 1%.
However, Hong Kong's Hang Seng index lost 1.4% to 23,968.66, while the Shanghai Composite index saw a modest 0.1% increase. Australia's S&P/ASX 200 slipped 0.4% to 8,930.50.
On Wednesday, U.S. markets declined, with the S&P 500 falling 1.2% to 7,420.10, the Dow Jones Industrial Average dropping 1% to 51,492.55, and the Nasdaq composite sinking 1.3% to 26,021.66. These movements followed projections from Federal Reserve policymakers indicating that nearly half of them foresee at least one interest rate increase in 2026. Higher interest rates can curb inflation but also slow economic growth and negatively impact investment prices.
Company-specific news also affected U.S. markets, with SpaceX erasing an early gain to fall 4.9%. Microsoft, Amazon, and Nvidia also experienced significant drops, weighing on the S&P 500.
Despite inflation concerns, a report indicated that retail revenue grew faster than expected in May, suggesting consumer spending could support the economy. Oil prices had been steadier earlier in the week due to optimism surrounding the tentative U.S.-Iran deal, which is expected to facilitate the reopening of the Strait of Hormuz and ease pressure on inflation. Early Thursday, Brent crude oil was trading at $78.31 per barrel, and U.S. benchmark crude was at $74.75 per barrel.
The U.S. dollar strengthened against the Japanese yen, trading at 160.62, up from 159.75. The euro was trading at $1.1515 against the dollar, up from $1.1503.