Asia report: Markets mixed on fresh Iran uncertainty

(Sharecast News) - Asia-Pacific markets closed mixed on Tuesday as investors weighed renewed uncertainty over US-Iran peace negotiations, while Wall Street benchmarks climbed to fresh highs overnight on technology optimism.

"Yesterday afternoon's spike in oil, US Treasury yields and the Dollar has mostly reversed, but the episode was a useful reminder that markets remain highly sensitive to every iteration of the US-Iran story," said Patrick Munnelly, market strategy partner at TickMill.

"The move was triggered by headlines suggesting communications between Washington and Tehran had broken down."

US president Donald Trump on Monday shrugged off the prospect of peace talks with Iran breaking down, telling CNBC: "I don't care if they're over, honestly."

He added: "I really don't care. I couldn't care less," saying the drawn-out negotiations had "started to get very boring."

Trump was responding to reports that Iranian negotiators were considering ending talks with Washington and moving to "completely block" the Strait of Hormuz in response to Israel's military campaign in Lebanon targeting Iran-backed Hezbollah.

Asked whether Iranian officials had told him they would no longer continue negotiations, Trump said: "No, they haven't."

Oil prices fell despite the geopolitical uncertainty, with Brent crude futures last down 1.55% on ICE at $93.51 per barrel, and the NYMEX quote for West Texas Intermediate losing 1.56% to $90.72.

Munnelly said the subsequent partial reversal in oil, yields and the dollar appeared linked to reports that Trump had pressured Israel to halt military action in Lebanon, "which investors interpreted as a possible step toward restarting US-Iran negotiations".

"Trump also claimed that talks with Iran were proceeding "at a rapid pace," even as the news flow remained difficult to reconcile," he said.

"The market's default baseline still seems to be that a deal is coming and that traffic through the Strait of Hormuz will eventually normalise."

Munnelly said Brent's fall of roughly 18%, from above $112 a barrel in mid-May to just over $91 at month-end, "clearly reflects optimism that the worst of the energy shock may be passing".

"But the intraday price action suggests a more cautious outlook," he added.

"Brent briefly moved close to $98 per barrel yesterday and is around $94 per barrel this morning, showing that energy markets are still vulnerable to headline tennis before any final agreement is signed and implemented."

Markets mixed across the region

Japan's Nikkei 225 declined 0.3% to 66,734.24, while the broader Topix fell 0.42% to 3,924.24.

Nippon Electric Glass dropped 9.97%, Mitsui Kinzoku lost 7.97%, and Yaskawa Electric Corporation fell 7.25%.

In China, the Shanghai Composite rose 0.43% to 4,075.10, while the Shenzhen Component gained 1.63% to 15,591.13.

Henan Dayou Energy climbed 10.07%, Shanghai Tianyang Hot Melt Adhesives added 10.06%, and Guangxi Radio and Television Information Network rose 10.04%.

Hong Kong's Hang Seng Index advanced 2.52% to 26,038.32.

Tencent Holdings jumped 10.92%, Meituan rose 9.14%, and JD.com gained 6.85%.

South Korea's Kospi 100 rose 0.66% to 11,032.77, led by Doosan Robotics, which climbed 20.45%.

Samsung Life gained 17.07%, while NCsoft added 14.38%.

South Korea's annual inflation rate accelerated to 3.1% in May from 2.6% in April, above forecasts for 3.0% and the highest reading since March 2024, as higher oil prices linked to the Middle East conflict fed through the economy.

Transport inflation rose to 11.6% from 9.7%, food inflation increased to 1.6% from 0.3%, and prices also accelerated across housing and utilities, clothing and footwear, recreation and culture, education, tobacco, and household equipment.

On a monthly basis, consumer prices rose 0.5%, matching April's pace but above forecasts for 0.3%.

Sydney, Wellington both in the red

Heading down under, Australia's S&P/ASX 200 edged down 0.06% to 8,724.40.

TPG Telecom fell 7.5%, Paladin Energy lost 5.93%, and Domino's Pizza Enterprises declined 5.86%.

Australia's seasonally-adjusted dwelling approvals fell 3.4% month on month to a three-month low of 16,710 units in April, easing from a 10.5% drop in March but worse than expectations for a 1.5% fall.

Approvals for private sector dwellings excluding houses declined 3.6%, while permits for private sector houses fell 1.0%.

Approvals dropped in New South Wales, Victoria and Western Australia, but rose in Queensland and South Australia.

Total approvals were still 10.2% higher than a year earlier.

Across the Tasman Sea, New Zealand's S&P/NZX 50 fell 0.56% to 13,170.71.

Vista Group International declined 5.79%, Eroad lost 4.76%, and Serko fell 4.71%.

Dollar mixed against regional peers

In currencies, the dollar rose 0.01% on the yen to trade at JPY 159.68, as fell 0.34% against the Aussie to AUD 1.3920, and slipped 0.02% on the Kiwi to change hands at NZD 1.6852.

"In the current environment, the distinction between a softening labour market and a renewed inflation shock is crucial: the former would support duration and risk assets, while the latter keeps central banks cautious and the dollar supported," Munnelly said.

"Markets still want to believe in a Hormuz deal, but the oil market is not trading as if the risk has disappeared," he added.

"For central banks, the difference between a temporary energy shock and a persistent inflation impulse remains the defining question."

Reporting by Josh White for Sharecast.com.