Asian Markets Hit Records on U.S.-Iran Peace Deal as Wall Street Retreats

Asian stock markets surged to record highs on Thursday following the signing of an initial U.S.-Iran peace agreement to end hostilities, while U.S. markets declined due to Federal Reserve signals of potential interest rate increases. Japan's Nikkei 225 gained 1.9% to 71,233.35, marking its first break above 70,000 this week, while South Korea's benchmark rose 0.6% to 8,917.31. Taiwan's Taiex jumped 1%, though Hong Kong's Hang Seng fell 1.4% and Shanghai's Composite edged 0.1% higher. Australia's S&P/ASX 200 slipped 0.4%.

The U.S. and Iran signed a permanent end-of-hostilities agreement that initiates a 60-day negotiating period on Iran's nuclear program, requiring Tehran to dilute its stockpile of highly enriched uranium. The deal immediately waives U.S.-backed sanctions, allowing Iran to sell oil freely—described as a major concession from Washington. Market analysts attributed the Asian rally to confidence in economic recovery and stabilized oil prices, with some noting hopes that reopening the Strait of Hormuz would ease global oil supply concerns and relieve inflationary pressure. Neil Newman, head of strategy at Astris Advisory Japan, described the rally as "very broad-based," reflecting expectations for Japanese economic recovery following the war's end.

The contrast with U.S. market weakness reflected investor anxiety over monetary policy. On Wednesday, the S&P 500 fell 1.2% to 7,420.10, the Dow Jones Industrial Average dropped 1% to 51,492.55, and the Nasdaq composite sank 1.3% to 26,021.66 after the Federal Reserve released projections showing nearly half its policymakers foresee at least one interest rate increase in 2026. Fed Chair Kevin Warsh, in his first news conference leading the central bank, declined to forecast the federal funds rate's year-end position but announced changes to Fed communication strategy, including ending hints about future rate direction in Fed statements.

Technology stocks were among the heaviest Wall Street losers, with Microsoft, Amazon, and Nvidia declining 3.8%, 3.5%, and 1.3% respectively. SpaceX, which debuted on the U.S. stock market last week to considerable fanfare, fell 4.9% in its first loss since its public listing. Oil prices moved lower in response to the Iran deal, with Brent crude falling 1.6% to $78.31 per barrel early Thursday. Despite consumer retail revenue growing faster than expected in May, high inflation continues to dampen consumer sentiment about personal finances.