Asia Markets Rebound, Oil Dives As Trump Says Iran War Could End Soon

Singapore: Asian stocks rallied and oil prices plunged at the start of trading on Tuesday, following a volatile session for markets overnight after U.S. President Donald Trump declared the Middle East war ‌could be "over soon."

MSCI's broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS), opens new tab was up 2.6%, paring losses since the start of the conflict, while Brent crude futures fell as much as 10% to below $90 per barrel as trading resumed. U.S. equity futures were more muted, with S&P 500 e-mini futures down 0.2% to pare Monday's rebound.

Trump's remarks injected a burst of optimism that contrasted sharply with events in Iran, where hardliners rallied behind new Supreme Leader Mojtaba Khamenei in a pointed show of defiance.

The competing signals whipsawed global markets on Monday: oil prices ⁠initially spiked and stocks on Wall Street tumbled before rebounding sharply after Trump's comments and fresh reports suggesting Washington may soften sanctions on Russian energy.

Oil ‌prices fell on Tuesday after hitting their highest level in more than three years in the prior session as U.S. President Donald Trump predicted the war in the Middle East could end soon, easing concerns about prolonged disruptions to global oil supplies.

Brent futures fell $6.51, or 6.6%, to $92.45 a barrel at 0018 GMT, while U.S. West Texas Intermediate (WTI) crude was down $6.12, or 6.5%, to $88.65.

Oil prices surged past $100 a barrel on Monday, hitting session highs ⁠of $119.50 for Brent and $119.48 for WTI, their highest since mid-2022, as supply cuts by Saudi Arabia and other producers during the expanding U.S.-Israeli war with Iran stoked fears of major disruptions to global supplies.

Prices later retreated after Russian President Vladimir Putin held a call with Trump and shared proposals aimed at a quick settlement to the Iran war, according to a Kremlin aide, easing concerns about a prolonged supply disruption.

While all of this has helped ease some of the short-term panic, it's hard to reconcile the idea of the conflict being 'very complete'", said Tony Sycamore, market analyst at IG in Sydney.

"Nonetheless, the toning down of President Trump's rhetoric, from demanding full surrender to declaring the mission 'very complete', is a welcome development that should help settle nerves for today's session in Asia, at least."

With investor confidence steadying after Monday's selloff amid signs of increased risk-taking by retail investors, Japan's Nikkei 225 (.N225), opens new tab jumped 3.6%, while South Korea's Kospi (.KS11), opens new tab surged 6.4%. The gains prompted the Korea Exchange to trigger a sidecar trading curb after futures rose more than 5%, halting programme trading for five minutes.

The backdrop for markets remained tense, however, with Iran's military warning that it would ‌step ⁠up its missile strikes in a further sign of defiance.

If Iran does anything that stops the flow of oil within the Strait of Hormuz, they will be hit by the United States of America TWENTY TIMES HARDER than they have been hit thus far," Trump said in a post on Truth Social, opens new tab afterwards.

U.S. Treasury bonds recovered after Monday's spike in oil prices sparked an inflation scare and fuelled expectations that central banks in Europe could tighten policy later this year.

The yield on the U.S. ⁠10-year Treasury bond was down 2.3 basis points at 4.109% as traders pushed out bets on the timing of the Federal Reserve's next rate cut, with the first reduction now not seen until July, according to the CME Group's FedWatch tool.

"We are still at troubling levels," analysts from ING said, referring to bond yields. "Expect ⁠nominal yields to fall for a bit on a reversal trade. But don't expect a dramatic structural rally in bonds," they wrote in a client note. "Remember, we still have clear inflation impulses to overcome, and the economy is down but not out."

The U.S. dollar index , which measures the ⁠greenback's strength against a basket of six major peers, retraced all of its gains of the past week and was trading down 0.1% at 98.79.

Gold was down 0.1% at $5,133.55, holding within its trading channel of the past week, while cryptocurrencies remained directionless, holding the same range they have tracked since the beginning of February.

Bitcoin was up 0.2% at $69,127.60, while ether was down 0.4% at $2,018.69.

ALSO READ: Global Bond Markets Plunge As Oil Surge Towards $120 Prompts Rate Hike Bets