(Sharecast News) - Asia-Pacific markets mostly rallied on Monday, led by technology stocks, after Iran and the US agreed a deal aimed at permanently ending the Middle East conflict and reopening the Strait of Hormuz.
"The Hormuz deal is a genuine risk-positive development and has unleashed a powerful rally in global equities," said Patrick Munnelly, market strategy partner at TickMill.
"Lower oil reduces inflation pressure, supports consumers and gives central banks more room to wait."
Pakistan's prime minister Shehbaz Sharif said on Sunday that both sides had agreed to an immediate and permanent end to military operations on all fronts, with a formal signing ceremony scheduled for 19 June in Switzerland.
Pakistan has acted as a mediator between Washington and Tehran.
US president Donald Trump said in a Truth Social post that the agreement would reopen the Strait of Hormuz without a toll system and end the US naval blockade of Iran.
"The Deal with the Islamic Republic of Iran is now complete," he said.
"Ships of the World, start your engines. Let the oil flow!"
"Global markets have started the week with a powerful risk-on move after the US and Iran reached an agreement to reopen the Strait of Hormuz," Munnelly said.
"The deal has eased fears of a lasting energy supply disruption and triggered a broad rally across equities, credit-sensitive assets and growth-linked trades."
Oil prices fell sharply on expectations of restored supplies through the strait, with Brent crude futures last down 4.97% on ICE at $82.99 a barrel, and the NYMEX quote for West Texas Intermediate dropping 5.43% to $80.27.
"Oil is the clearest market expression of the breakthrough," Munnelly said.
He added that Brent was now only around 5% above its long-run average in real terms, marking a major change from the peak of the conflict, when markets were pricing a much more severe supply disruption.
"But oil has not returned to its immediate pre-conflict level of around $72.50 per barrel, and that distinction matters for central banks," he added.
Technology stocks lead regional risk-on rally
tSoftBank rose 10.31%, while Tokyo Electron gained 7% and Advantest added 7.67%.
In South Korea, Samsung Electronics and SK Hynix advanced 4.5% and 6.42%, respectively.
Taiwan Semiconductor Manufacturing Company rose 2.81% in Taipei, while Hon Hai Precision Industry, which trades as Foxconn, gained 2.69%.
"The MSCI Asia Pacific index rose around 3%, while US and European equity futures are up more than 1.2%," Munnelly said.
"Japan's Nikkei 225 is on track for a record close, helped by the combination of lower oil, stronger risk appetite and renewed confidence that the global growth shock may be fading."
Bourses in the green across Asia
Japan's Nikkei 225 surged 4.99% to 69,317.50, while the broader Topix climbed 3.03% to 3,999.60.
Taiyo Yuden jumped 22.64%, Ibiden gained 19.08%, and Sumco Corporation rose 17.85%.
In China, the Shanghai Composite advanced 1.61% to 4,096.47, while the Shenzhen Component jumped 3.79% to 15,531.11.
Guangzhou Fangbang Electronics climbed 18.64%, Guangdong Jia Yuan Technology added 15.41%, and Zhejiang HangKe Technology gained 10.05%.
Hong Kong's Hang Seng Index rose 0.5% to 24,842.67.
Lenovo Group gained 9.31%, J&T Global Express climbed 7.06%, and SMIC advanced 6.98%.
South Korea led regional gains, with the Kospi 100 surging 5.5% to 10,630.61.
LG Innotek rose 16.7%, Samsung Electro-Mechanics gained 16.63%, and LS Industrial Systems added 15.73%.
Sydney joins rally, Wellington bucks trend
Heading down under, Australia's S&P/ASX 200 advanced 1.25% to 8,914.00.
Vault Minerals jumped 14.71%, Regis Resources gained 13.33%, and Virgin Australia Holdings rose 12.89%.
New Zealand bucked the regional trend, with the S&P/NZX 50 falling 0.25% to 13,360.59.
Fisher & Paykel Healthcare declined 3.27%, Meridian Energy lost 2.52%, and KMD Brands fell 2.44%.
Dollar in the red against regional peers
In currencies, the dollar was last down 0.07% on the yen to trade at JPY 160.13, as it declined 0.37% against the Aussie to AUD 1.4139, and slipped 0.19% on the Kiwi to change hands at NZD 1.7112.
Munnelly said the improvement in risk sentiment was not confined to equities, with the dollar softer against most major currencies as investors rotated away from havens and Bitcoin rising to its highest level in almost two weeks.
"The key point is that rates markets have not fully followed oil lower," he said.
"At the end of February, markets were pricing roughly 60 basis points of Fed cuts by year-end.
"Now, even after the Hormuz agreement, they still price around 15bps of hikes."
Reporting by Josh White for Sharecast.com.
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