US-Iran Deal Boosts Global Markets as Wall Street and Asia Rally, Yen Hits Historic Low
Global financial markets showed a positive response following reports of a US-Iran agreement to halt mutual attacks and allow free passage of ships through the Strait of Hormuz. Asian markets opened mixed on Tuesday, with South Korea's KOSPI rising about 2% and Japan's Nikkei climbing 1.3%, while Hong Kong's Hang Seng index fell nearly 1%. This followed Wall Street's strong rebound Monday, where the Nasdaq surged 2.1%, the S&P 500 gained 1.2%, and the Dow Jones reached a historic high above 52,000 points. Futures trading indicated further gains, led by technology and chip stocks, including Nvidia, Amazon, Alphabet, Apple, Meta, Microsoft, and Tesla. Alphabet notably joined the Dow Jones index.
Despite the monthly decline of 6.2% in the Nasdaq and a nearly 2% weekly drop in the S&P 500, the Dow Jones showed resilience with a 0.6% monthly gain. Analysts attributed the tech sector's recent pullback to profit-taking rather than a fundamental shift in the AI-driven rally. Investors are cautious ahead of key US labor market data due Thursday, which will influence Federal Reserve interest rate decisions.
In the US bond market, government yields remained stable with the 10-year Treasury at about 4.38%. Corporate bonds saw volatility, highlighted by SpaceX's $25 billion bond issuance that initially attracted strong demand but quickly lost value, resulting in significant investor losses. Meanwhile, the Japanese yen plunged to its lowest level since 1986 at 162.27 per dollar, despite aggressive monetary tightening by the Bank of Japan, raising rates to 1% to combat inflation pressures from the Middle East energy crisis. Experts expect continued downward pressure on the yen due to interest rate differentials favoring carry trades.
Energy markets softened as tensions in the Persian Gulf eased, with Brent crude falling 1.2% to $72.30 per barrel and WTI down 0.9% to $70.11. Natural gas prices also declined slightly. Gold prices dropped over 1% during the day, closing the month with their worst performance since 2008 amid reduced geopolitical risk and expectations of higher US interest rates. Bitcoin showed volatility, falling 1.3% below $60,000 after briefly surpassing that level the previous day.
Market strategists warn of increased volatility due to quarter-end portfolio rebalancing and a shortened trading week for the US Independence Day holiday. Overall, the US-Iran deal has injected optimism into global markets, though investors remain watchful of upcoming economic data and geopolitical developments.
