Global stock markets fluctuated at high levels, the Nikkei surpassed 70,000 during trading, the Korean stock market closed up 2%, and oil prices hovered around $80.

Global stock markets fluctuated at high levels, the Nikkei surpassed 70,000 during trading, the Korean stock market closed up 2%, and oil prices hovered around $80.

After three consecutive trading days of gains exceeding 1% each, global stock markets are seeing their upward momentum slow, as investors turn to evaluate whether the US-Iran Hormuz Strait agreement can go smoothly and what policy signals will be revealed by this week's concentrated central bank decisions.

The MSCI Global Equity Index has become volatile following strong previous gains, US stock futures edged lower, Brent crude fell below $83 per barrel, and European stocks opened slightly higher. Previously, boosted by the signing of the US-Iran Hormuz Strait reopening agreement, the S&P 500 jumped 1.7% on Monday, and the Nasdaq 100 surged 3.1%.

However, Asia-Pacific markets, especially those in Japan and South Korea, remain exuberant. After the Bank of Japan raised rates as expected today, the Nikkei 225 index broke through the 70,000 mark during the session, setting a record high. South Korean stocks closed up 2.1%. The Reserve Bank of Australia announced it would keep rates unchanged, marking the first time this year it has paused, with the Australian dollar remaining under pressure.

Charu Chanana, Chief Investment Strategist at Saxo Markets, remarked, "The easily picked fruits of the rebound have already been taken," as the US-Iran peace framework allowed investors to quickly digest part of the oil price and inflation risks, "but the next phase of gains needs confirmation—not only whether the ceasefire can hold, but also if the smooth resumption of oil traffic through Hormuz can truly be achieved."

Nikkei 225 closed up 0.1% at 69,404.50 points. The TOPIX index closed down 0.2% at 3,991.14 points. The Korea Seoul Composite Index closed up 2.1% at 8,726.60 points.The yen was little changed at 160.31 per US dollar.Most US stock index futures edged lower, with Nasdaq futures down 0.12%.European stocks opened slightly higher. Euro Stoxx 50 opened up 0.35%, Germany’s DAX up 0.2%, UK FTSE 100 up 0.1%, France’s CAC 40 up 0.3%.The US 10-year Treasury yield was little changed at 4.47%.Japan’s 10-year bond yield rose by 7.5 basis points to 2.650%.Bitcoin fell 1%, to $65,840.82.WTI crude was little changed. Brent crude fell below $83 per barrel.Spot gold rose 0.3% to $4,323.67 per ounce.

BOJ Rate Hike Meets Expectations, Quantitative Tightening Paused

The Bank of Japan raised its policy rate to 1%, the highest level since 1995, with both resolutions passed by a 7-to-1 vote. The central bank’s statement explicitly warned of upside inflation risks: core CPI may exceed the price target, and the annual rise in CPI may accelerate to significantly above 2%; oil price increases are being transmitted at a "relatively fast pace", potentially spreading and pushing up consumer prices across a broad range of goods and services. The Bank said it will continue to raise policy rates based on developments in economic activity, prices, and financial conditions.

Meanwhile, the BOJ adjusted its pace of quantitative tightening, announcing it will maintain monthly government bond purchases at about 2 trillion yen from April 2027, ceasing further reductions, and abolishing the previous mid-term assessment routine. This arrangement means the central bank is slowing the pace of balance sheet contraction while maintaining its rate hike path, forming some internal balance in its policy orientation.

After the BOJ decision was announced, the Nikkei 225 broke through 70,000, rising more than 0.5% at one point and hitting a historic high; the TOPIX index recovered its losses and was nearly flat. The MSCI Asia-Pacific Index rebounded after a sluggish early session, rising 0.3%.

Despite the BOJ continuing its rate hikes, the yen remains under pressure against the US dollar, reversing gains after a brief rebound; Japanese government bond yields soared following the announcement. Charu Chanana stated, "BOJ rate hikes help lift the Nikkei, because the decision fully met expectations," "This will not substantially change Japan’s earnings story or liquidity backdrop."

Hormuz Agreement Boosts Sentiment; Global Gains Await Confirmation

According to a senior US official during a conference call with reporters, President Trump and Vice President Vance have signed the electronic version of the memorandum of understanding with Iran. Trump, in a meeting with French President Macron, said Hormuz is "partially open" and will be "fully open" on Friday; the formal agreement is scheduled to be signed in Switzerland on Friday.

This news drove both global stocks and bonds higher on Monday, with Brent crude falling accordingly. However, after three days of gains, market sentiment has turned cautious. Before the war broke out, the Hormuz Strait handled about a fifth of global oil shipments, and investors are still seeking further confirmation of actual navigation progress through the waterway.

Most US stock index futures edged lower, with Nasdaq futures down 0.12%. European stocks opened slightly higher. Euro Stoxx 50 opened up 0.35%, Germany’s DAX up 0.2%, UK FTSE 100 up 0.1%, France’s CAC 40 up 0.3%.

Morgan Stanley sharply lowered its oil price forecasts for coming quarters. Analyst Martijn Rats pointed out in a report that, despite key risks remaining, the temporary agreement between Washington and Tehran is an important step toward de-escalation and increased crude exports through Hormuz. ANZ Bank economist Matthew Galt and others wrote, "The market needs time to digest, Hormuz traffic needs time to return to normal, and inventories also need replenishing. Therefore, we believe this has almost no immediate impact on the reaction function of central banks."

Global Central Bank Decision Week: Fed Welcomes First Meeting Under Warsh

This week’s central bank decision calendar is exceptionally busy. The Federal Reserve will announce its policy decision on Wednesday, marking the first meeting chaired by Warsh. Economists expect the Fed to keep its benchmark rate at the 3.5%–3.75% range, with swap market pricing in less than an 80% chance of another 25 basis point hike before December.

Jean Boivin and Wei Li, strategists at BlackRock Investment Institute, wrote in a report that the firm is closely watching how Warsh will interpret the balance between growth and inflation, as well as any signals of change in Fed communication, such as whether he will reduce reliance on forward guidance. "This could make Fed policy changes a source of volatility, as investors try to infer future policy directions from fewer clues."

The Bank of England and Swiss National Bank are likewise expected to hold rates steady this week. The European Central Bank already acted last week, raising rates for the first time in nearly three years. President Christine Lagarde warned that inflation sparked by the Iran war is spreading beyond energy to wider ranges.

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