(Sharecast News) - Asia-Pacific markets rallied on Wednesday as easing geopolitical tensions boosted risk appetite after Donald Trump said the US would suspend planned attacks on Iranian infrastructure for two weeks, contingent on Tehran agreeing to the "complete, immediate, and safe" reopening of the Strait of Hormuz.
As Patrick Munnelly, market strategy partner at TickMill, noted: "A two-week ceasefire has been established between the US and Iran, providing a much-needed sense of relief to financial markets amidst the intense rhetoric from president Trump just yesterday."
The announcement, alongside confirmation from Iranian foreign minister Abbas Araghchi that the country would "cease their defensive operations" and coordinate safe passage through the strait over the same period, triggered a sharp decline in oil prices and underpinned broad-based gains across regional equities.
Munnelly added that "this development explains the robust rebound in Asian equities overnight, with the Nikkei soaring over 5%, as well as the significant decline in oil prices."
Markets in the green across Asia
In Japan, the Nikkei 225 surged 5.39% to 56,308.42, while the Topix climbed 3.32% to 3,775.30.
Technology and industrial names led the advance, with Furukawa Electric jumping 17.61%, Advantest up 13.6% and Renesas Electronics rising 12.91%.
Data showed Japan's current account surplus stood at JPY 3,932.7bn in February, broadly unchanged from a year earlier and above expectations of JPY 3,549bn.
The surplus was driven by a widening primary income surplus of JPY 4,240.3bn, offsetting a sharp narrowing in the goods surplus to JPY 267.6 billion as imports rose faster than exports.
Chinese markets also posted strong gains, with the Shanghai Composite rising 2.69% to 3,995.00 and the Shenzhen Component jumping 4.79% to 14,042.50.
Gains were led by Beijing Piesat Information Technology, up 13.09%, Suzhou Harmontronics Auto Tech, which added 10.66%, and Guangzhou Fangbang Electronics, up 10.5%.
In Hong Kong, the Hang Seng Index advanced 3.09% to 25,893.02, with CMOC Group, Meituan and SMIC all gaining more than 10%.
South Korea led regional performance, with the Kospi 100 soaring 7.58% to 6,794.17.
Hyundai Engineering & Construction surged 21.04%, while SK Square and Hankook Tire rose 15.83% and 15.38% respectively, as investors rotated back into cyclical and growth-sensitive sectors.
Stocks higher down under as RBNZ holds rates
In Australia, the S&P/ASX 200 climbed 2.55% to 8,951.80, supported by strong gains in consumer and mining stocks.
Zip Co jumped 19.76%, Greatland Resources rose 14%, and Temple & Webster Group added 13.33%.
Across the Tasman Sea, New Zealand's S&P/NZX 50 rose 1.41% to 13,253.94, with Tourism Holdings up 8.61%, Pacific Edge gaining 6.08% and Fletcher Building advancing 5.1%.
The Reserve Bank of New Zealand held its policy rate at 2.25% for a second consecutive meeting, as expected, following an aggressive easing cycle that had seen rates cut by 325 basis points since August 2024.
Policymakers said the decision balanced the risk of rising medium-term inflation against the need to support economic recovery, warning that the Middle East conflict could lift inflation further from its current 3.1% level, above the bank's 1% to 3% target range.
Reflecting on the broader outlook, Munnelly cautioned that "even if diplomatic resolutions and peace prevail in the coming weeks, the financial markets are likely to experience lasting effects," adding that "the outlook for interest rates remains complicated."
Dollar weakens as oil prices plunge
Currency markets reflected the shift in sentiment, with the dollar weakening 0.74% against the yen to trade at JPY 158.44, as it fell 0.96% on the Aussie to AUD 1.4202, and dropped 1.54% versus the Kiwi to change hands at NZD 1.7185.
Oil prices fell sharply as the ceasefire announcement eased supply concerns.
Brent crude futures were last down 13.48% on ICE at $94.54 per barrel, while the NYMEX quote for West Texas Intermediate plunged 15.87% to $95.03, reversing recent gains driven by fears of disruption in the Strait of Hormuz.
However, Munnelly warned that "the initial optimism in the markets won't last long without addressing what comes next," noting that "a key indicator will be whether traffic can resume through the Strait of Hormuz," while highlighting that "even if shipping through the Strait of Hormuz resumes, damage to regional energy infrastructure could lead to supply constraints for an extended period."
Reporting by Josh White for Sharecast.com.
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