Asia report: Stocks jump as oil prices drop, inflation risks ease

(Sharecast News) - Equity markets across Asia jumped on Wednesday as oil prices stabilised at a four-week low amid increased hopes that the US and Iran will soon agree a deal to fully reopen the Strait of Hormuz, with tech stocks in demand.

Sentiment also received a boost from US and European markets, with benchmark indices in Paris, Frankfurt and New York all settling at record highs on Tuesday.

Japan's Nikkei 225 benchmark surged 3.7%, South Korea's KOSPI gained 3.8%, while the Shanghai Composite added 1.5% and Australia's S&P/ASX 200 rose 0.9% to a new high. Gains in Hong Kong and Bombay were more subdued, at 0.2% and 0.1% respectively, while Singapore's STI index slipped 0.6%.

Oil prices dropped on Tuesday after US Treasury Secretary Bessent claimed in an interview with CNBC that a final deal between the US and Iran to reopen the Strait of Hormuz could be reached as early as Wednesday. After dropping over 5% to $79.36 a barrel, Brent bounced slightly on Wednesday to $80.64.

Patrick Munnelly, partner of market strategy at Tickmill Group, said the recent, rapid leg down in oil prices has led to a softening of rate-hike expectations as inflation risks ease.

"Reports suggest Washington, Tehran and Oman are close to an agreement to reopen the Strait of Hormuz, which would be a major de-escalation if delivered. The key caveat is still implementation. Oil can price diplomatic optimism quickly, but physical flows, insurance costs and shipping confidence may take longer to normalise," Munnelly said.

Japanese electronics stocks were outperformers on Wednesday, with Ibiden leading the charge with a 24% surge after beating forecasts with first-quarter numbers and lifting its full-year outlook. First-quarter operating profits were up 52% year-on-year.

Industrial stocks in Tokyo were also putting in big gains, including Yamaha Motor, Mitsui Kinzoku and Murata Manufacturing Co among the best performers.