Asian equities fell on Thursday as renewed fighting between the United States and Iran pushed investors back towards safer assets, even as oil prices eased after Israel and Lebanon moved to implement a ceasefire.
MSCI’s Asia-Pacific ex-Japan index dropped 1.5%, while S&P 500 e-mini futures slipped 0.5%. South Korean shares, reopening after a break, fell as much as 2.6%, and Japan’s Nikkei 225 declined 1.9%.
The weakness followed a softer session on Wall Street, where the S&P 500 lost 0.7% overnight as talks between Washington and Tehran made little progress and hostilities flared again.
Risk-off mood returns
Geopolitical risk again dominated trading, overshadowing stronger US economic data.
“Financial markets shifted back into a risk-off mode as the US and Iran exchanged fire again,” Westpac analysts wrote in a note cited by Reuters.
The shift came even after US ISM services data for May came in stronger than expected.
The report showed businesses placing orders and rebuilding inventories in anticipation of potential shortages and higher prices linked to the Iran war.
Still, investors appeared more focused on the immediate risk of escalation. That pushed equities lower across Asia and supported demand for traditional havens, including the yen.
Oil eases after Israel-Lebanon ceasefire move
Oil prices softened as traders assessed signs of easing tensions in another part of the Middle East.
Brent crude futures fell 1.3% to $96.59 a barrel as trading resumed on Thursday after Israel and Lebanon agreed to implement a ceasefire.
The truce depends on a complete cessation of fire by Hezbollah and the evacuation of its operatives from the South Litani Sector.
The two sides had agreed to a ceasefire last month, but hostilities had continued, leaving investors cautious about the durability of the latest move.
In Washington, the Republican-led House approved a war powers resolution aimed at blocking President Donald Trump from continuing the conflict against Iran.
The measure is largely symbolic, as it must still pass the Senate and would require a two-thirds majority in both chambers to overcome a likely veto.
Yen firms as traders watch 160 level
Currency markets reflected the broader caution.
The yen strengthened 0.1% to 159.88 per dollar, moving away from the 160 level that traders view as a possible trigger for Japanese intervention.
Bank of Japan Governor Kazuo Ueda said the central bank must weigh the costs and benefits of raising interest rates if inflation risks outweigh downside risks to the economy.
The remarks signalled a strong chance of a rate increase this month.
The Australian dollar edged 0.1% higher after data showed the country’s trade balance returned to surplus in April. A rebound in resource exports helped offset a rise in fuel imports.
The US dollar index held at 99.44 after a three-day advance that took it to its strongest level since April 7. The yield on 10-year US Treasuries fell 1.4 basis points to 4.473%.
Broadcom slides after revenue miss
In company news, Broadcom shares plunged more than 13% in extended trading after the chipmaker missed Wall Street expectations for second-quarter revenue.
Its top executive also left a previous 2027 sales forecast unchanged, a rare sign that the AI chipmaker may be losing momentum.
Gold rose 0.9% to $4,473.61 an ounce, staying within the trading channel seen since the middle of last month.
Outlook
Markets remain highly sensitive to developments around the US-Iran conflict and the durability of the Israel-Lebanon ceasefire.
The moves across equities, oil, currencies and crypto point to a broader shift towards caution, even as stronger US services data offered evidence that parts of the economy remain resilient.
For investors, the immediate focus is likely to remain on geopolitical headlines, the yen’s approach to the 160-per-dollar level, and whether oil’s decline can hold if Middle East risks continue to intensify.
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