Asia-Pacific Markets Drop Amid Israel-Iran Flare-Up and US-China Trade Truce
Asia-Pacific stock markets ended the week in negative territory as escalating tensions between Israel and Iran rattled investor sentiment across the region. Even as a temporary US-China trade truce brought some relief, the geopolitical uncertainty surrounding the Middle East took center stage, pushing oil prices higher and equity indices lower.
Middle East Tensions Rattle Markets
Markets across the Asia-Pacific region reacted nervously to Israel’s targeted airstrikes on Iranian military and nuclear facilities. The spike in geopolitical tensions sparked a flight to safety, with global crude oil prices surging by over 8%. Brent crude neared $75 per barrel, while US WTI hovered around $73.5, raising fresh inflationary concerns for oil-importing economies in Asia.
Japan’s Nikkei 225 closed lower, with technology and transport stocks bearing the brunt of the selloff. South Korea’s Kospi also declined, while Australia’s ASX 200 posted mild losses as energy stocks partially offset broader weakness. Safe-haven assets like gold and the US dollar saw renewed buying interest from cautious investors.
US-China Trade Truce Offers Temporary Calm
Offsetting some of the panic was news of a 90-day truce between the United States and China. The agreement includes commitments from China to ease restrictions on rare-earth exports, while the US agreed to pause further tariff hikes. While this helped limit deeper losses, markets remained cautious, as existing tariffs remain in place and structural issues unresolved.
Analysts noted that while the truce injects some short-term optimism into global trade, the broader macroeconomic pressures from the Middle East crisis and inflationary risks could overshadow gains unless tensions subside soon.
Global Markets React to Mixed Signals
US markets remained relatively stable amid lower-than-expected inflation data and positive earnings reports from major tech firms. Oracle gained on robust financials, while Boeing slipped following an aviation mishap involving an Air India 787. Treasury yields edged lower, reinforcing expectations of a potential rate cut from the US Federal Reserve later in the year.
Investors are now eyeing upcoming central bank signals, further developments in the Middle East, and concrete steps in the US-China trade execution to determine the direction of global markets heading into the second half of 2025.
