Reports of a potential peace memorandum between the US and Iran drove a sharp rally in equities and a steep decline in oil prices, easing inflation concerns and boosting sentiment across risk assets.
The Asian region is expected to benefit significantly from declining energy import costs. If the Middle East peace deal is implemented, it will provide a significant economic boost for major oil importers such as Japan and South Korea.
News that the U.S. and Iran are nearing a memorandum to end the conflict, with the US concluding offensive operations, saw oil prices slump, with benchmark Brent crude dropping to $100.04 early Thursday, from Tuesday’s high of 112-113, while West Texas Intermediate was last seen at $92.60, down from 102-103 on Monday.
The potential resolution of the Middle East conflict is rapidly pulling the extreme risk premium out of the energy markets, providing immediate relief to global inflation expectations.
The S&P 500, Nasdaq 100, and several Asian indices hit fresh record highs, led by strong momentum in semiconductor stocks after upbeat earnings and AI-related partnership developments involving Intel and AMD.
The S&P 500 gained 1.5%, Nasdaq 100 was up 2.1% to 28,599, and Russell 2000 closed at a record high 2,886. The DJIA lagged 1.2% to 49,910, while in Europe, the DAX surged 2.1% to 24,918.
The tech sector continues to decouple from broader macro anxieties. Exceptional earnings beats and strategic partnerships are reinforcing semiconductors as the primary growth engine for global equities.
Bloomberg data highlights the S&P 500 closing at a record 7,259.22. The rally was heavily driven by a supercycle in the semiconductor sector, with Intel jumping 13% on Apple partnership reports and AMD soaring 16.5% after hours.
The US dollar fell broadly as geopolitical risk premiums eased, triggering a 3%+ surge in gold above $4,700 hitting a multi-week high as the prospect of peace dragged down the US Dollar and shifted safe-haven dynamics.
There was renewed strength in the Japanese yen which rallied 1.8% amid suspected “stealth intervention” and bearish technical signals on USDJPY.
The dollar-yen pair has further potential downside pressure with USDJPY below the 157.30-157.55 key short-term resistance. The next intermediate supports is at 154.65 and 154.05.
The US 30-year Treasury yield fell back below 5% (to 4.98%) as investors locked in rates. The 10-year yield remains anchored at 4.4%.
In other news, the US ADP employment beat expectations, as private payrolls increased by 109,000 in April, surpassing the forecast of 99,000, signaling continued labour market tightness that complicates the Fed’s easing path.
Top events to watch on Thursday include US Initial Jobless Claims and Eurozone Retail Sales.
(Source: OANDA)
