Asian Markets Rally as US-Iran Peace Agreement Boosts Risk Appetite
Asian equity markets advanced on Thursday after the United States and Iran formally signed an agreement aimed at ending hostilities, fuelling optimism that geopolitical risks and energy market disruption may finally be easing.
The agreement, signed by leaders from both nations, establishes a 60-day negotiation period to reach a comprehensive settlement covering Iran’s nuclear programme. As part of the interim framework, Tehran has agreed to dilute its stockpile of highly enriched uranium while the United States will lift sanctions that have restricted Iranian oil exports.
The announcement was made after US markets had closed, leaving Asian investors as the first to react to the breakthrough.
Japan’s Nikkei 225 extended its remarkable rally, climbing 1.9% to 71,233.35 and setting another record high. The index has now comfortably surpassed the 70,000-point milestone for the first time, supported by both easing geopolitical tensions and continued enthusiasm for artificial intelligence-related technology stocks.
South Korea’s Kospi also continued its record-breaking run, gaining 0.6% to 8,917.31. Taiwan’s Taiex rose 1%, benefiting from strong demand for semiconductor and technology shares linked to the AI boom.
Elsewhere, performance was more mixed. Hong Kong’s Hang Seng Index fell 1.4% to 23,968.66, while mainland China’s Shanghai Composite edged 0.1% higher. Australia’s ASX 200 declined 0.4%.
The positive reaction in Asia contrasted with weakness on Wall Street, where markets closed lower before details of the US-Iran agreement became public.
The Dow Jones Industrial Average fell 1.0%, while the S&P 500 declined 1.2% and the Nasdaq Composite lost 1.3%.
The sell-off followed a more hawkish-than-expected Federal Reserve meeting. Policymakers left interest rates unchanged at 3.75%, but updated forecasts suggested a growing number of officials now expect higher rates before year-end.
Nearly half of Federal Reserve policymakers indicated that at least one further rate increase may be required during 2026, marking a significant shift from earlier expectations that rates would be cut.
The change reflects concerns that inflation risks have not fully disappeared, despite the recent collapse in oil prices following progress towards peace in the Middle East.
For markets, the competing forces are becoming increasingly clear. The US-Iran agreement is helping reduce geopolitical uncertainty, lowering energy prices and supporting economic growth expectations. However, investors must also contend with the prospect that central banks could keep monetary policy tighter for longer if inflation remains above target.
For now, Asian investors appear focused on the positive implications of renewed oil exports, improved global trade flows and a potentially more stable geopolitical environment, helping drive regional equity markets to fresh highs.
