Stocks shaky as Israeli attacks on Lebanon tests Iran ceasefire
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Asian stocks ticked up early on Friday but gains were capped as traders questioned the durability of this week’s U.S.-Iran ceasefire and remained wary of fragile hopes for Israel-Lebanon peace talks.
Investors were nervous as Iran cited Israel’s ongoing attacks on Lebanon as a key sticking point in its agreement with the U.S.
MSCI’s broadest index of Asia-Pacific shares outside Japan gained 0.5%, led by a 1.9% jump for South Korea’s Kospi. Japan’s Nikkei 225 tacked on 1.5%, while S&P 500 e-mini futures reversed earlier losses to trade flat.
“The U.S.-Iran ceasefire led to a sharp recovery in Asian markets but the risk-on sentiment got tested yesterday,” said Rupal Agarwal, Asia quant strategist at Bernstein in Singapore.
“We believe this could be the beginning of the end and is presenting an opportunity for investors to focus on pre-war trends and fundamentals,” she said. “We recommend adding back some beaten-down names.”
On Thursday, the S&P 500 rose 0.6%, with MSCI’s benchmark of global equities making modest gains after Israeli Prime Minister Benjamin Netanyahu said on Thursday he is seeking direct talks with Beirut – a day after the worst bombardment of the war killed more than 300 people in Lebanon and placed the U.S.-Iran ceasefire in jeopardy.
Brent crude rose 1% to $96.83 a barrel as trading resumed in Asia, after Hezbollah launched a missile at Israel, triggering air raid sirens in parts of the country, including in Tel Aviv.
The Strait of Hormuz remains largely closed to shipping, with marine traffic at well below 10% of normal volumes on Thursday as Tehran asserted its control of the strategic waterway that typically carries one-fifth of global oil and gas shipments.
The closure of the strait during the six-week Iran war sent shockwaves through global markets as oil prices surged and energy supplies tightened.
U.S. President Donald Trump weighed in with a blunt warning. In a post on Truth Social, he said Iran was doing a “very poor job” of allowing oil to pass through the strait. “That is not the agreement we have!” he wrote, underscoring Washington’s frustration as the market fallout intensified.
The U.S. dollar index, which measures the greenback’s strength against a basket of six currencies, was up 0.1% at 98.92, after data released Thursday showed weekly jobless claims increased by 16,000 to 219,000 and continuing claims fell by 38,000 to 1.794 million, the lowest level since May 2024.
The Core PCE price index also rose 0.4% for second straight month, reflecting a year-on-year increase of 3.0%.
The yield on the U.S. 10-year Treasury bond was up 0.6 basis point at 4.285%.
Fed funds futures show traders bringing forward expectations for the Federal Reserve’s next 25-basis-point rate cut to April 2027. The implied probability that the U.S. central bank stays on hold at its meeting that month has slipped to 49.6%, from 64% on Thursday, when markets still leaned toward easing later in the year, according to the CME Group’s FedWatch tool.
Elsewhere, in the latest blow to the embattled private credit asset class, investors have asked to pull more than 15% of their assets from Carlyle’s flagship private credit interval fund, the group said in a shareholder letter on Thursday.
Bitcoin was down 0.7% at $71,903.27, while ether was 1.0% lower at $2,191.81.
