Asia report: Markets mixed as oil prices pull back slightly

(Sharecast News) - Asia-Pacific markets traded mixed on Tuesday as oil prices eased slightly after US president Donald Trump delayed a planned strike on Iran, although Middle East risks continued to weigh on sentiment.

"Tech is losing altitude as the global bond selloff starts to bite into AI valuations," said Patrick Munnelly, market strategy partner at TickMill.

"MSCI Asia Pacific fell 0.7%, South Korea's Kospi, one of the clearest AI-capex proxies in the region, dropped 3.7%, and Nasdaq 100 futures are down 0.5% after a second consecutive decline in the Philadelphia Semiconductor Index."

Trump said in a Truth Social post that US military leaders had been told to call off a "scheduled attack of Iran tomorrow" after requests from the leaders of Qatar, Saudi Arabia and the United Arab Emirates.

"A Deal will be made, which will be very acceptable to the United States of America, as well as all Countries in the Middle East, and beyond. This Deal will include, importantly, NO NUCLEAR WEAPONS FOR IRAN!," he wrote.

However, Trump said he had also told military leaders "to be prepared to go forward with a full, large scale assault of Iran, on a moment's notice, in the event that an acceptable Deal is not reached."

Despite the fragile ceasefire, the Strait of Hormuz remained closed by Tehran, while the US continued to blockade Iranian ports.

"As the Middle East conflict enters its third month, there is little prospect of a swift and durable settlement between the US and Iran and with it the full reopening of the Strait of Hormuz," Moody's said in a note.

Brent crude futures were last down 1.74% on ICE at $110.15 per barrel, while the NYMEX quote for West Texas Intermediate declined 1.11% to $107.45.

"Geopolitics is still the underlying driver of the rates shock," Munnelly said.

"Trump said he would refrain from military action against Iran, helping Brent fall 2% to around $110 per barrel, but that is a small relief move rather than a de-escalation."

Munnelly said oil was still up roughly 80% year-to-date and the Strait of Hormuz remained largely blocked, leaving markets to price "a prolonged disruption rather than a quick resolution".

"The result is a persistent inflation concern, with the US 30-year yield up to 5.14%, its highest since 2023, while Japan's 30-year yield has reached a record high since issuance began in 1999," he added.

Markets mixed across the region as Japanese economy expands

In equity markets, Japan's Nikkei 225 fell 0.44% to 60,550.59, while the broader Topix rose 0.63% to 3,850.67.

Fujikura dropped 16.95%, Furukawa Electric lost 8.37%, and Dowa Holdings fell 6.79%.

Investors were assessing Japan's first-quarter GDP data, which showed the economy grew at an annualised 2.1% in the first three months of the year, ahead of the 1.7% expected by economists polled by Reuters and up from 1.3% in the prior quarter.

The figures did not capture the full impact of the Iran war, which began at the end of February.

A summit later in the day between Japanese prime minister Sanae Takaichi and South Korean president Lee Jae Myung was also in focus.

In China, the Shanghai Composite rose 0.92% to 4,169.54, while the Shenzhen Component edged up 0.26% to 15,569.91.

Shuangliang Eco-Energy Systems gained 10.08%, Shanghai Fengyuzhu Exhibition rose 10.05%, and Duzhe Publishing & Media added 10.04%.

Hong Kong's Hang Seng Index advanced 0.48% to 25,797.85.

CNOOC rose 2.99%, Tencent Holdings gained 2.4%, and China Resources Power Holding added 1.9%.

South Korea's Kospi 100 fell 3.34% to 8,793.73.

Doosan Robotics dropped 15.1%, LG Electronics lost 11.66%, and Hyundai Steel declined 11.16%.

"The dollar is firmer across majors, reinforcing the broader risk-off tone," Munnelly said.

"The market is not abandoning the AI story, but it is questioning how much valuation support remains when long-end yields are pushing back toward multi-year highs."

Sydney higher as consumer sentiment rises modestly

Turning down under, Australia's S&P/ASX 200 climbed 1.17% to 8,604.70, led by Tuas, which rose 17.62%.

ALS gained 6.83%, while Stanmore Coal added 5.93%.

Australian consumer sentiment rose modestly in May as easing fuel prices provided some relief to households, although confidence remained deeply pessimistic amid higher borrowing costs and concerns over the economic outlook.

The Westpac-Melbourne Institute consumer sentiment index rose 3.5% to 83.0 from 80.1 in April, recovering from the previous month's 12.5% fall.

The improvement followed Australia's temporary fuel excise cut, which helped lower petrol prices after the recent surge linked to tensions around the Strait of Hormuz.

However, sentiment remained well below its long-run average of 100.3.

Westpac's mortgage rate expectations index rose 2.3% to a three-year high of 181.2, with 85% of consumers expecting mortgage rates to rise further over the next year.

Housing sentiment weakened sharply, with the "time to buy a dwelling" index falling 16.1% to an 18-month low of 72.

"Having raised rates in its previous three meetings, the board is likely to pause at its next meeting to assess the impact of the energy price shock and a significant monetary tightening," the survey said.

Across the Tasman Sea, New Zealand's S&P/NZX 50 rose 1.66% to 12,974.32.

Pacific Edge gained 7.14%, Heartland Group Holdings rose 4.41%, and Eroad added 4.21%.

Dollar gains on regional peers

In currencies, the dollar was last up 0.17% on the yen to trade at JPY 159.09, as it gained 0.67% against the Aussie to AUD 1.4044, and advanced 0.51% on the Kiwi to change hands at NZD 1.7108.

"The AI trade can survive higher yields for a while, but the valuation cushion is thinner," Munnelly said.

Reporting by Josh White for Sharecast.com.