Asian Stocks Set For Best Week Since 2022 Ahead Of US-Iran Ceasefire Talks

Asian stocks advanced on Friday, putting them on track for their best week in more than three years, as Israel sought talks with Lebanon, raising hopes for a break in Middle East hostilities and an opening of the crucial Strait of Hormuz. 

Iran cited Israel's ongoing attacks on Lebanon as a key sticking point in its ceasefire agreement with the U.S., which requires Iran to reopen the strait, through which a fifth of global energy supplies typically pass. 

Delegations from Tehran and Washington are set to hold talks in Pakistan on Saturday. MSCI's broadest index of Asia-Pacific shares outside Japan added 0.9% to put it up 7.3% for the week, the most since November 2022. China's ChiNext led gains with a 3.8% jump.

U.S. S&P 500 e-mini futures reversed earlier losses to trade flat.

"We believe this could be the beginning of the end" of the war, and that presents "an opportunity for investors to focus on pre-war trends and fundamentals," said Rupal Agarwal, Asia quant strategist at Bernstein in Singapore.

"We recommend adding back some beaten-down names." On Thursday, the S&P 500 rose 0.6%, with MSCI's benchmark of global equities making modest gains after Israeli Prime Minister Benjamin Netanyahu said he is seeking direct talks with Beirut - a day after the worst bombardment of the war killed more than 300 people in Lebanon and placed the U.S.-Iran ceasefire in jeopardy. 

Oil markets remained jittery, creeping up from this week's one-month lows. Brent crude rose 1.5% to $97.33 a barrel. The Strait of Hormuz remains largely closed to shipping, with marine traffic at well below 10% of normal volumes on Thursday as Tehran asserted its control of the strategic waterway.

The closure of the strait during the six-week Iran war sent shockwaves through global markets as oil prices surged and energy supplies tightened worldwide. In a post on Truth Social, U.S. President Donald Trump said Iran was doing a "very poor job" of allowing oil to pass through the strait. "That is not the agreement we have!"

Regional Impact

In an early sign that the Middle East conflict is feeding cost pressures into the world’s second-largest economy, China's factory-gate prices rose for the first time in 3-1/2 years in March, official data showed. 

Japanese Prime Minister Sanae Takaichi told a cabinet meeting on Friday that Tokyo plans to release 20 days' worth of oil reserves from May to ensure stable domestic supply. 

Japan's Nikkei 225 vaulted 1.8%, with shares in heavily weighted Fast Retailing climbing to a record high after the Uniqlo owner posted a stronger-than-expected jump in profits on Thursday. 

The yen softened 0.2% against the dollar. South Korea's KOSPI rose 1.4% to log its best one-week performance in nearly five years, shrugging off a warning from the Bank of Korea that the broadening conflict in the Middle East threatens to derail growth and worsen inflation as it kept its policy interest rate steady on Friday.

"With a new governor arriving in late April, the BOK delivered a carefully calibrated message to leave options open on future policy decisions," analysts from ING wrote in a research report. The U.S. dollar index, which measures the greenback's strength against a basket of six currencies, was up 0.1% at 98.93.

Data released Thursday showed weekly jobless claims increased by 16,000 to 219,000 and continuing claims fell by 38,000 to 1.794 million, the lowest level since May 2024. 

The Core PCE price index also rose 0.4% for a second straight month, reflecting a year-on-year increase of 3.0%. The yield on the U.S. 10-year Treasury bond was up 0.4 basis point at 4.295%. In cryptocurrencies, bitcoin was down 1.0% at $71,723.34, while ether was 1.3% lower at $2,185.33.