U.S.-Iran negotiations remain unresolved; oil prices have risen for seven consecutive days; Korean stocks closed higher; the yen strengthened slightly; gold fell more than 1% intraday.

The blockade of the Strait of Hormuz continues, international oil prices have risen for the seventh consecutive trading day, driving up inflation expectations and putting pressure on global bond markets and gold. This week, major central banks such as the US Federal Reserve and the European Central Bank will hold policy meetings one after another, and earnings reports from tech giants will be intensively released, putting the market to multiple crucial tests.

According to CCTV News, Iranian Foreign Minister Araghchi, who is visiting Russia, stated on Monday the 27th local time that the US has requested negotiations, and Iran is currently considering this option. On Tuesday, Brent crude oil rose intraday by up to 2.9% to $111.32/barrel, then fell back to around $103.73, with an intraday gain of about 2%; WTI crude oil was reported at $98.52/barrel, with a similar increase. Gold came under pressure due to the strengthening of the US dollar, spot gold prices dropped 1.12% to $4630/ounce; the yield on US 10-year Treasury bonds rose 1 basis point to 4.35%.

At the same time, the Bank of Japan decided by a 6–3 vote to keep the policy rate unchanged, and the yen immediately strengthened slightly by 0.2% to about 159 yen per US dollar. This decision has significantly increased market expectations for a rate hike by the Bank of Japan in June, with the implied probability rising to over 70%, and investors are awaiting Governor Kazuo Ueda's press conference at 3:30 pm Tokyo time.

The rise in oil prices, together with multiple risk events, is weighing on investor sentiment. The Euro Stoxx 50 index opened down 0.1%, the German DAX index fell 0.1%, the UK FTSE 100 index fell 0.1%, and the French CAC 40 index fell 0.1%. The MSCI Asia Pacific Index was down 0.3%, hovering near levels seen at the outbreak of the US-Israel vs. Iran war in late February; S&P 500 index futures slipped slightly by 0.1%, but the index is still on track for its strongest monthly performance since 2020.

The Euro Stoxx 50 index opened down 0.1%, the German DAX index fell 0.1%, the UK FTSE 100 index fell 0.1%, and the French CAC 40 index fell 0.1%.The Nikkei 225 index closed down 1%, at 59,917.46 points. The TOPIX Index closed up 1%, at 3,772.19 points. The Korea Seoul Composite Index closed up 0.4%, at 6,641.02 points.S&P 500 index futures slipped slightly by 0.1%, but the index is still on track for its strongest monthly performance since 2020.The yield on US 10-year Treasury bonds rose 1 basis point to 4.35%.The yen strengthened slightly by 0.2% to about 159 yen per US dollar.Brent crude oil rose intraday by up to 2.9% to $111.32/barrel, then fell back to around $103.73, with an intraday gain of about 2%; WTI crude oil was reported at $98.52/barrel, with a similar increase.Gold came under pressure due to the strengthening of the US dollar, spot gold prices dropped 1.12% to $4630/ounce.

Uncertain prospects for Iran's peace proposal, ongoing blockade continues to impact the oil market

According to Axios and the Associated Press, the Iranian proposal is: If the US lifts the maritime blockade and ends the war, Iran will reopen the Strait of Hormuz, and nuclear issue negotiations will be postponed for future arrangements. White House spokesperson Karoline Leavitt confirmed on Monday that Trump has discussed the proposal with senior advisers. However, Trump previously stated clearly that he would not lift the blockade until a deal with Iran is "100% completed", creating significant uncertainty over whether he will accept the proposal.

This US-Israel vs. Iran war, which has been ongoing for about eight weeks since its outbreak in late February, has continuously impacted the global commodities market. Although the initial phase of the war dragged down stocks, global stock markets have since basically recovered lost ground and even hit new historical highs, while oil prices have remained elevated.

Brent crude oil rose intraday by up to 2.9% to $111.32/barrel, then fell back to around $103.73, with an intraday gain of about 2%; WTI crude oil was reported at $98.52/barrel, with a similar increase.

Super Central Bank Week: Inflation pressure tests forward guidance

This week, the US Federal Reserve, the European Central Bank, the Bank of England, and the Bank of Canada will each make rate decisions, with the economies covered representing about half of global economic output. The market generally expects all banks to keep rates unchanged, but investors are highly focused on how officials assess the threat posed by persistently rising oil prices to inflation prospects.

Ian Lyngen of BMO Capital Markets said the tone of the press conference will emphasize the prudence of the current "wait and see" stance, but "investors are nearing a point where they may expect the Fed to state more clearly the impact of the energy shock, even though this is unlikely to be fully presented at the conference."

Of note, according to CNBC, Wednesday’s Fed policy decision may be Jerome Powell’s last meeting, with Kevin Warsh expected to take over as chair in May. The US Department of Justice decided last Friday to drop its criminal investigation into Powell, prompting Senator Thom Tillis to immediately withdraw his opposition to Warsh's nomination. The European Central Bank and the Bank of England are expected to remain on hold on Thursday, but economists expect both to leave room for rate hikes later this year.

Tech giant earnings to be intensively released: Can AI trades sustain the rally?

An important support for this market rebound comes from renewed AI trading. Alphabet, Microsoft, Amazon, and Meta will release their earnings reports together on Wednesday, with Apple following on Thursday; Asian companies are also entering the busiest week of this earnings season, providing early clues on how the war is impacting corporate performance.

Lori Calvasina, Head of US Equity Strategy at RBC, believes the Middle East conflict will not materially impact the earnings of the US AI and tech sectors, and positions US stocks as the preferred global safe haven asset.

Gary Tan, Fund Manager at Allspring Global Investments, noted that Asia tech stocks have recently recorded gains even amid ongoing supply chain disturbances, indicating that investors are increasingly "looking forward" with regard to recent geopolitical risks. "But for sustained revaluation relative to US stocks, the key still depends on the capital expenditure signals released in this week’s earnings by the ultra-large-scale cloud vendors."

Walter Todd, President and Chief Investment Officer at Greenwood Capital Associates, said that in the process of markets rising to historic highs, persistent geopolitical risks seem to be set aside; the current rally mainly relies on positive earnings revisions and optimistic expectations. He warned, "If the largest companies’ earnings stumble in the coming weeks, this will pose a major risk to market momentum."

Bank of Japan votes to keep rates unchanged, June rate hike expectations climb

The Bank of Japan decided by a 6–3 vote to keep rates unchanged, and the split vote significantly increased expectations of a rate hike in June, with related contract implied probability rising to above 70%. Japanese government bond prices fluctuated after the decision was announced. The yen strengthened slightly, and investors await cues from Governor Kazuo Ueda’s press conference.

In Asia-Pacific stock markets, Korean stocks rose 0.6%, with total market capitalization surpassing the UK to become the world's eighth largest stock market.

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