Asian equity markets surged on Thursday, led by Japan's Nikkei 225 hitting a fresh record high, as a risk-on mood fueled by optimism over a potential US-Iran diplomatic deal extended gains from Wall Street's record-setting session. The Nikkei 225 rose 0.81%, while the broader Topix added 0.70%. South Korea's Kospi climbed 1.03%, and the Kosdaq advanced 0.77%. Australia's S&P/ASX 200 was up 0.22%, and Hang Seng futures pointed to a stronger open in Hong Kong.
The rally's primary catalyst is the prospect of a diplomatic breakthrough between Washington and Tehran. In a Fox Business interview broadcast on Wednesday, President Donald Trump stated the conflict was "very close to over" and reiterated his belief that Iran wanted to "make a deal very badly." This easing of geopolitical tensions has applied downward pressure on oil prices, with West Texas Intermediate crude trading around $91 per barrel and Brent crude near $94.60. Lower oil prices have alleviated fears of tighter supply, higher inflation, and slower global growth, giving equity investors more confidence to take on risk.
Asian markets drew further confidence from a strong US session on Wednesday, where the S&P 500 rose 0.80% to a record 7,022.73 and the Nasdaq Composite jumped 1.59% to a record 24,016.02, marking its 11th consecutive gain. The Dow Jones Industrial Average slipped slightly by 72 points. This performance reinforced the sense that investors are willing to look past geopolitical stress when supported by corporate earnings and favorable commodity prices.
Ahead of the US open on Thursday, futures indicated continued momentum. S&P 500 futures rose 0.19%, Nasdaq 100 futures gained 0.41%, and Dow Jones Industrial Average futures climbed by 46 points (nearly 0.1%). The rally's sustainability now hinges on corporate earnings justifying the optimism, with reports due from companies like Travelers, Charles Schwab, PepsiCo, and Netflix. Analysts note that for the advance to be convincing, it must broaden beyond banks and select technology names to include more sectors, signaling a shift driven by improving fundamentals rather than narrow optimism.
The market setup, while constructive, remains fragile. Investors are betting on de-escalating geopolitical risks while trying to capture positive earnings narratives. This combination can unravel quickly if either pillar weakens, leaving the market vulnerable to abrupt reversals despite the current positive tone.
