Gauges in Japan, South Korea and Australia advanced, with the MSCI Asia Pacific Index rising 0.3%. That came after Wall Street benchmarks edged up to a record close on Monday and the Philadelphia Semiconductor Index jumped 2.6% to an all-time high.
West Texas Intermediate crude held above $98 a barrel Tuesday after President Donald Trump said the ceasefire with Iran was on “massive life support” and rejected the Islamic Republic’s latest peace proposal. Brent rose 0.3%.
Higher oil prices weighed on the bond market, which has priced out the odds of interest rate cuts by the Federal Reserve this year. The 10-year Treasury yield climbed six basis points to 4.41% on Monday, with investors getting a read on US inflation Tuesday.
Solid US earnings have driven a fresh round of upgrades to Wall Street’s year-end targets for the S&P 500, as investors bet corporate profits can sustain the rally despite lingering Middle East tensions. Global equities have erased losses tied to the Iran conflict and have climbed to records, supported by expectations that heavy spending on artificial intelligence, particularly in Asia, will underpin earnings growth.
“Markets are pricing both AI-driven growth and the Middle East supply shock,” said Jean Boivin, head of BlackRock Investment Institute. He said the buildout of AI data centers is offsetting the oil supply shock’s “drag on growth.”The fragile ceasefire in the Middle East appeared to waver, with Trump calling Iran’s response to his peace proposal a “piece of garbage” and that he “didn’t even finish reading it.”Trump didn’t indicate whether the US would resume military attacks on Iran as he previously has threatened if the Islamic Republic’s leadership didn’t agree to his terms. Trump told Fox News earlier on Monday that he’s looking at reviving a plan to escort ships through the Strait of Hormuz.
“An agreement remains elusive and risks remain elevated,” said Mark Haefele at UBS Chief Investment Office. “Both sides remain under pressure to conclude a deal.”
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