Asian stocks surged to record highs on 7 May as investors priced in growing hopes of a potential Middle East peace deal, while oil prices eased and the U.S. dollar weakened amid shifting global risk sentiment.
Japan’s Nikkei 225 crossed the 62,000 level for the first time after reopening from a holiday, extending a technology-led rally supported by strong corporate earnings.
South Korea’s KOSPI and Taiwan’s Taiwan Weighted Index also hit record highs.
The broader MSCI Asia-Pacific index excluding Japan rose around 1%, marking another all-time high and extending gains for the week.
Kyle Rodda, Senior Financial Analyst at Online Trading said she was being cautious.
"But we've seen this story before, and the rug could get pulled out of the market pretty quickly too. Ultimately, if we keep seeing progress in talks, Asian markets will keep rallying."
Investor sentiment improved after reports that Iran was reviewing a peace proposal linked to efforts to end the ongoing conflict and stabilise energy flows through the Strait of Hormuz.
Analysts, however, warned that uncertainty remains over whether key issues - including Iran’s nuclear programme and the reopening of the strategic waterway - can be resolved.
Oil prices, which had fallen nearly 8% in the previous session, steadied in early Asian trade but remained volatile after recent swings driven by conflict risks.
Oil, inflation and policy risks
Brent crude oil traded slightly higher at around $102 a barrel, still well above levels seen before the conflict began.
The war, which began in February, has pushed oil prices roughly 40% higher overall, adding pressure to global inflation and bond yields.
U.S. Federal Reserve officials have warned that sustained high energy prices could fuel inflationary pressures and strain global supply chains.
Analysts from Oversea-Chinese Banking Corporation (OCBC) noted that the reopening of the Strait of Hormuz would not have an immediate effect on the prices.
In currency markets, the dollar index slipped to 98.03 as the euro and sterling extended gains.
The Japanese yen remained in focus after sharp moves in recent sessions, with traders speculating about possible intervention by Japanese authorities amid volatility.
According to OCBC analysts, the main question is whether the Ministry of Finance will continue to defend the yen or has already deployed sufficient firepower.
"Intervention alone is unlikely to shift the broader trend unless backed by stronger policy support like a more assertive BOJ (Bank of Japan) hiking cycle or better alignment with external drivers such as lower oil prices and U.S. yields," the analysts stated, sticking to their year-end target of 155.
On Wall Street, both the S&P 500 and the Nasdaq Composite closed at record highs, supported by strong corporate earnings, particularly in the technology sector.
Investors are now awaiting U.S. non-farm payrolls data due on Friday, which is expected to provide further clues on the health of the world’s largest economy.
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U.S. President Donald Trump said on Monday that there is a good chance” of reaching a deal with Iran, but warned that Washington would resume military operation if negotiations fail.
Yemen warned the Houthis were seeking to replicate Iran's Strait of Hormuz strategy in the Red Sea, as U.S. President Donald Trump said there was a "good chance" of a deal with Tehran but warned strikes could resume if talks failed.
Saudi Arabia said its overnight strikes on Iran-backed group targets in Iraq were carried out in self-defence and warned it would take further military action if the groups launched new attacks against the kingdom.
Moscow should stop linking Russia-Armenia relations to Azerbaijan, Baku's Foreign Ministry spokesperson Aykhan Hajizada has said, after Russia again raised the Collective Security Treaty Organisation's role during the former Garabagh conflict.
Ford raised its full-year earnings forecast after reporting stronger-than-expected second-quarter adjusted profit, as resilient demand for its vehicles and operational improvements helped offset tariff-related costs.
SK Hynix reported record quarterly profit on Wednesday, but its shares slumped 10 per cent after the South Korean chipmaker fell short of investor expectations built around the artificial intelligence (AI) boom.
Oil prices have fallen more than six per cent as a pause in U.S.-Iran hostilities eased fears of wider supply disruption around the Gulf.
Paramount Skydance agreed to pause its acquisition of Warner Bros Discovery until after a ruling on a challenge by states to the deal, plunging the $110 billion deal into further uncertainty.
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