While the US and Iran engage in both fighting and negotiations, Asia-Pacific stock markets are under pressure, but Korean stocks rebound to new highs; oil prices diverge, and gold and silver fall.

While the US and Iran engage in both fighting and negotiations, Asia-Pacific stock markets are under pressure, but Korean stocks rebound to new highs; oil prices diverge, and gold and silver fall.

Progress in US-Iran negotiations boosts risk appetite, but a new round of US military strikes puts pressure on the stock market rally. Brent crude rebounds, the dollar inches higher, and gold and silver come under pressure and decline.

Asia-Pacific stock markets were mixed on Tuesday. The MSCI Asia-Pacific Index rose by 0.5% overall. South Korean stocks surged after returning from holiday, hitting a record high. Japanese stocks rose and then retreated to end slightly lower, while the Australian and Euro Stoxx 50 futures declined.

As reported by WallstreetCN, according to CCTV International News, the US military carried out strikes on missile-launching sites in southern Iran and boats attempting to lay mines on Monday night, which cooled the market’s optimism about a temporary US-Iran agreement and the reopening of the Strait of Hormuz.

The US Central Command characterized this action as a "defensive strike," stating it aimed to protect the safety of American troops stationed locally.

Japanese stocks retreated from highs, other Asia-Pacific markets under pressure. The Nikkei 225 Index slipped about 0.18%, and the TOPIX fell about 0.36%.

Australia’s S&P/ASX 200 opened down about 0.17%-0.6%. Euro Stoxx 50 index futures also fell about 0.3%.

However, Korean stocks rallied after the holiday. The Korean Composite Index opened 2.8% higher, then extended its gain to 3.1% in early trading, reaching an all-time high of 8131.15 intraday; small-cap Kosdaq also rose about 2.12%.

Korea's strong performance on Tuesday mainly stemmed from the "catch-up rally" logic. Monday was a public holiday in Korea, so the Korean market was closed, while global markets generally rose that day.

At that time, expectations for an imminent breakthrough in the US-Iran talks peaked—MSCI Asia-Pacific rose and US stock index futures strengthened. Korean investors, returning Tuesday, absorbed the missed gains all at once.

Earlier, according to the Global Times citing the Washington Post, the US and Iran reached agreement on a memorandum of understanding covering core terms like a 60-day ceasefire extension, mine clearance and reopening of the Strait of Hormuz, and Iran's commitment not to seek nuclear weapons.

Fox News cited officials saying the framework agreement is currently "95% done."

Brent crude oil rebounded about 2% on Tuesday to $98 per barrel after a more than 7% plunge on Monday.

WTI crude oil futures plunged about 5% to around $92 per barrel, with the two benchmarks diverging considerably, reflecting high market uncertainty over the situation.

RBC Singapore's Asia Macro Strategy Director Abbas Keshvani said:

Given that previous negotiation hopes have repeatedly fallen through, the market will remain cautious. But if talks make substantial progress, it could further depress energy prices and inflation expectations, thereby pulling down yields.

Meanwhile, the pressure on global oil supply can't be ignored. UBS pointed out last Friday that due to the ongoing blockage of the Strait of Hormuz, global oil markets are becoming increasingly tight.

According to UBS data, global observable oil inventories fell by a combined 246 million barrels in March and April, and total output loss may exceed 1 billion barrels by the end of May. UBS believes the market is currently "severely undersupplied."

US Treasury yields fall, dollar strengthens, gold and silver under pressure

As US markets resumed spot trading after the holiday, all US Treasuries rose. The 10-year yield once dropped 6 basis points to 4.50%, reflecting market optimism on US-Iran agreements and cooling inflation and rate expectations.

Japan's 40-year government bond yield also fell 5 basis points to 4.095%.

The dollar gained about 0.1% against G10 currencies overall. The Bloomberg Dollar Spot Index edged up.

Gold erased early gains and turned about 0.8% lower to around $4,533 per ounce.

Spot silver likewise plunged 2.5% to $76.11.

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