US-Iran Ceasefire to Boost Asian Markets, Analysts Predict

US-Iran Ceasefire Brings Relief to Asian Markets

Donald Trump's announcement of a two-week ceasefire between the US and Iran has brought welcome relief to Asian markets, according to strategists. Equities are expected to see strong rallies across the region in the near term, they say.

However, the lack of clear details on the agreement and lingering concerns over the Strait of Hormuz are cause for caution and volatility will remain high, they warn. Strategists are cautioning investors not to get ahead of themselves, as the market is still on edge.

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In Japan, tech and AI stocks look best positioned for buying, according to strategists. However, they warn that things are not guaranteed to go smoothly from here, and investors should not get ahead of themselves.

Markets will be risk-on for a bit, but strategists still need to see the Strait of Hormuz open before they can breathe a sigh of relief. "We still need to see the Strait of Hormuz open... it will be 2 weeks on edge," one strategist said.

Emerging market currencies are likely to strengthen while credit spreads narrow across the board as the escalation scenario has been avoided for the time being. The high-beta names that have been beaten up a little bit lately, including South Korea and EM Asia, can benefit from this.

However, whether the rally holds is "tricky," and strategists warn that if we don't see something "signed" and on paper in the coming days, we'll be right back in the same spot. In Japan, the market is in a euphoric mood, but strategists are cautioning that it may be difficult for the Nikkei to keep rising as far as 60,000 unless we start to see a true ceasefire.

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The dollar-yen may go to the low 158 range, but going to the 157 level may be difficult since the war is not completely over yet. JGBs will be bought today, but energy prices aren't going to return to previous levels. The chance of a BOJ rate hike has dropped slightly as the justification for raising rates to curb inflation has weakened somewhat in the near term.