The Hang Seng Index staged a cautious recovery this week, climbing to $25,887, its highest point since March 18, as investors reacted to a ceasefire announcement between the United States and Iran. The truce, brokered by Pakistan, reduced geopolitical tensions and raised hopes for the reopening of the Strait of Hormuz, a critical chokepoint for 20% of the world's oil supply.
However, the ceasefire faces immediate challenges. Israel launched heavy bombardments in Lebanon, which it claims are not part of the agreement. In response, Iran has reportedly closed the Strait of Hormuz, leading to a modest rebound in oil prices. US crude rose to about $97.33 a barrel, while Brent climbed to roughly $96.86, reversing sharp declines from the previous day. Goldman Sachs cut its second-quarter oil forecasts to reflect lower immediate risk but warned prices could climb again if disruptions persist.
The geopolitical uncertainty caused Asia-Pacific markets to wobble after an initial relief rally. Japan's Nikkei hovered around flat, South Korea slipped 0.4%, and Chinese blue chips fell 0.6%. Meanwhile, the valuation of the Hang Seng Index remains depressed, with a price-to-earnings ratio of around 13.5-13.7, compared to 17 for the FTSE 100 and 20 for the S&P 500. This is partly due to struggles among major tech components like Alibaba and Tencent, whose stocks have dropped roughly 16% over the last three months.
In a related development, a US appeals court declined to block the Pentagon's blacklisting of AI company Anthropic, handing the Trump administration an interim win in a case with implications for AI procurement and national security policy.
