Asia Mixed as Oil Rises Amid Geopolitical Risks, Measured Start Seen For Indian Markets

Mumbai, May 26: Asian equities traded cautiously on Tuesday as investors weighed fresh concerns after new U.S. strikes in Iran dampened optimism around a potential peace deal.

Regional markets moved in a narrow range, with Japan’s Nikkei edging lower 0.4% while MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.7%. South Korea’s Kospi rose 3% and Hong Kong’s Hang Seng edged up 0.17%. Investors remained hesitant amid uncertainty over the trajectory of global interest rates, geopolitical risks and energy prices.

Oil prices rebounded after recent sharp declines. The rise came after the United States carried out what it described as defensive strikes on missile sites and boats in southern Iran, raising concerns that negotiations aimed at easing tensions in West Asia could face setbacks.

The renewed military action dented hopes of a swift agreement between Washington and Tehran that could reopen the Strait of Hormuz and stabilise global oil supply chains. Markets had earlier rallied on expectations of diplomatic progress and lower crude prices.

Wall Street Shut for Holiday, Investors Watch Yields and Commodities

U.S. markets remained closed on Monday for the Memorial Day holiday, leaving investors without fresh Wall Street direction.

In the absence of U.S. cash trading, global investors focused on commodities, currencies and geopolitical developments. Treasury yields remained elevated, reflecting lingering inflation concerns and caution around the global interest-rate outlook.

Currency markets were mixed, with the dollar finding some support from safe-haven demand after the latest strikes in Iran. Analysts warned that continued volatility in oil prices could complicate inflation trends and central bank policy expectations globally.

Europe Extends Rally to Multi-Month Highs

European equities, however, continued to provide supportive global cues, with the pan-European STOXX 600 index climbing to over two-month highs.

The rally was fuelled by optimism that diplomatic negotiations could eventually reduce tensions in West Asia and ease pressure on energy markets. Banking, airline and technology shares led gains across Europe, while hopes of softer long-term oil prices supported broader risk appetite.

Investor sentiment in Europe was also aided by continued enthusiasm surrounding artificial intelligence-linked sectors and improving appetite for cyclical stocks.

Indian Markets May open with Cautious Positive Bias

The overall global setup points to a cautious-to-positive opening for Indian benchmark indices.

Supportive European cues could help domestic sentiment, though rising crude prices following the latest U.S. strikes may keep investors on edge. Higher oil prices are particularly sensitive for India as they can pressure inflation, the rupee and fiscal balances.

Sectors such as oil marketing companies, aviation and paint stocks could remain in focus amid fluctuations in crude prices, while broader market sentiment may stay volatile due to geopolitical uncertainty and elevated global yields.

Source:

• Exchanges