The Asian stock market edged up on Wednesday, while crude oil hovered near its lowest levels in weeks, as investors interpreted the ceasefire between Israel and Iran as a signal to return to riskier assets, easing concerns about an imminent energy crisis.
Meanwhile, the U.S. dollar remained near a nearly four-year low against the euro, and two-year Treasury yields dropped to their lowest point in about six weeks, as falling oil prices helped ease fears of inflation-driven pressure on bonds.
Asian shares rise
The fragile ceasefire has largely held, despite Israel warning of a strong retaliation to Iranian missile attacks that followed U.S. President Donald Trump’s declaration of an end to the conflict.
In the Asian stock market, Japan’s Nikkei rose 0.3 percent, Australia’s main stock index edged up 0.043 percent, and Taiwan’s benchmark climbed 1.09 percent. In addition, Hong Kong’s Hang Seng gained 1.28 percent, while mainland China’s blue-chip index added 1.37 percent.
The MSCI International ACWI Price Index was up 1.45 percent after reaching a record high overnight. In the U.S. stock market, the S&P 500 gained 1.11 percent, while Nasdaq futures rose 0.064 percent. In Europe, the EURO STOXX 50 gained 1.44 percent.
Analysts noted that markets aren’t overly concerned about a limited conflict involving mostly airstrikes between the two countries. The real impact comes from the threat of a wider war, one that could draw in deeper U.S. involvement or lead to Iran blocking the Strait of Hormuz. For now, those risks appear minimal.
Read: Crude oil prices surge over 1 percent to above $67 amid Middle East stability
U.S. monetary policy back in focus
As stock markets rose, Brent crude rebounded slightly, gaining 83 cents to reach $67.97 per barrel, after having dropped as much as $14.58 in the past two sessions. U.S. West Texas Intermediate crude mirrored the rise, up 83 cents at $65.20 per barrel.
Meanwhile, spot gold also recovered slightly, gaining 0.37 percent to $3,330.85 following major declines in the previous session.
As geopolitical concerns ease, U.S. monetary policy is back in focus. Federal Reserve Chair Jerome Powell warned on Tuesday that rising tariffs could start pushing inflation higher as early as this summer, a critical period for the Fed as it weighs potential interest rate cuts.
Meanwhile, data revealed an unexpected drop in U.S. consumer confidence in June, pointing to signs of weakening in the labor market. Despite this, markets are still only pricing in about a 19 percent probability that the Fed will lower rates by 25 basis points in July, according to the CME FedWatch tool.
