Asia report: Markets fall as Iran rules out direct US talks

(Sharecast News) - Asia-Pacific markets fell on Thursday as geopolitical tensions weighed on sentiment after Iran ruled out direct talks with the United States, despite reviewing a proposal to end the war.

Iranian foreign minister Abbas Araghchi said that an exchange of messages via mediators "does not mean negotiations with the US," while earlier reports indicated Tehran would reject a ceasefire offer and instead pursue its own conditions for ending the conflict.

Stephen Innes of SPI Asset Management said "conviction slipped out of the market during the Asia session, not with a bang but with a quiet retreat as traders found themselves stuck between conflicting headlines and an unchanging reality underneath."

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Japanese equities declined, with the Nikkei 225 falling 0.27% to 53,603.65 and the Topix down 0.22% at 3,642.80.

Losses were led by TOTO, which dropped 5.66%, alongside Ebara Corporation, down 4.25%, and Tokio Marine Holdings, which fell 3.44%.

Innes noted that "equities reflected that same lack of clarity. Asian stocks drifted modestly lower after two days of gains, not because something broke, but because nothing resolved," adding that "it was a session defined by hesitation, where traders chose to reduce exposure rather than press positions into a narrative that keeps shifting by the hour."

Chinese markets were weaker, with the Shanghai Composite sliding 1.09% to 3,889.08 and the Shenzhen Component losing 1.41% to 13,606.44.

Environmental and technology stocks led declines, including Dynagreen Environmental Protection Group, down 10.02%, Fujian Haixia Environmental Protection Group, which fell 9.99%, and Guosheng Shian Technology, down 9.98%.

The cautious tone extended across the region as "the headlines are moving faster than the underlying fundamentals," Innes said, warning that "markets can price a story, but they struggle when the story keeps rewriting itself before any of the details are confirmed."

In Hong Kong, the Hang Seng Index dropped 1.89% to 24,856.43, dragged lower by sharp losses in growth and financial names.

Kuaishou Technology tumbled 14.04%, Pop Mart International Group fell 10.46%, and China Life Insurance declined 8.48%.

Innes added that "in that kind of environment, probability models start to feel stretched, and positioning naturally shrinks," highlighting a broader pullback in risk appetite.

South Korean equities recorded the steepest regional losses, with the Kospi 100 falling 3.66% to 6,208.13.

Hanwha Solutions plunged 18.22%, while DB Insurance dropped 9.66% and SK Square lost 7.77%.

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Australian markets were relatively resilient, with the S&P/ASX 200 edging 0.1% lower to 8,525.70.

Nickel Mines fell 8.47%, Megaport declined 7.68%, and Treasury Wine Estates dropped 4.8%.

New Zealand was the regional outlier, with the S&P/NZX 50 rising 0.37% to 12,976.99.

Gains were led by Mainfreight, up 6.01%, alongside Serko, which added 2.76%, and Infratil, up 2.5%.

Dollar edges higher as oil prices gain

In currency markets, the dollar edged higher against regional peers, rising 0.03% on the yen to trade at JPY 159.52, as it gained 0.21% against the Aussie to AUD 1.4424, and climbed 0.31% on the Kiwi to change hands at NZD 1.7276.

Oil prices advanced as geopolitical uncertainty intensified, with Brent crude futures last up 3.94% on ICE at $106.25 per barrel, and the NYMEX quote for West Texas Intermediate gaining 3.66% to $93.63.

Innes said "crude edged higher again, Brent holding above $103, but the move lacked urgency," describing it as "more like a default bid than a strong directional call, a market still leaning on supply risk even as the rhetoric around US-Iran talks swings back and forth."

He added that "the Strait of Hormuz remains a point of tension, and until there is clear evidence of normalized flows, the oil market will continue to carry a premium," while warning that "as long as crude holds firm, it acts as a quiet drag on sentiment, limiting how far equities are willing to push higher even when the headlines briefly turn constructive."

Reporting by Josh White for Sharecast.com.