BY COMFORT OGBONNA
Asian stocks recovered on Tuesday after three consecutive sessions of losses, supported by a decline in oil prices and renewed hopes that diplomatic efforts in the Middle East could ease tensions. Investors also turned their attention to a crucial round of corporate earnings reports that could determine whether the recent artificial intelligence-driven market rally has further room to continue.
Oil prices pulled back from a one-month high as traders responded to reports of possible mediation efforts aimed at reducing tensions in the Middle East. However, concerns remained elevated after Yemen’s Iran-aligned Houthi movement announced plans to impose a naval blockade on Saudi Arabia, raising fears of further disruptions to global energy supplies.
The announcement came amid escalating exchanges between the United States and Iran, even as international efforts continued to revive a fragile ceasefire. Iranian officials said Tehran had received a proposal from mediators for a temporary 10-day ceasefire designed to create conditions for broader negotiations aimed at ending the conflict.
Brent crude futures fell 0.74% to $88.56 a barrel on Tuesday after reaching a one-month high of $91.42 in the previous session. Investors welcomed signs of possible diplomatic progress, although uncertainty over the direction of the conflict continued to weigh on sentiment.
“Investors appear to be taking a more optimistic view despite having seen similar situations before and hoping for the same outcome,” said Nick Twidale, chief market strategist at ATFX Global in Sydney.
Twidale warned that risks remained high, saying concerns over a wider regional escalation were increasing. He added that markets could react sharply if a new trigger intensified the conflict.
In equity markets, MSCI’s broadest index of Asia-Pacific shares outside Japan gained more than 2%, recovering from three consecutive days of declines. Japan’s Nikkei index climbed nearly 3%, while South Korea’s KOSPI advanced about 4.5% as investors returned to technology and semiconductor stocks.
Analysts described the move as a temporary recovery rather than a confirmation that market risks had disappeared.
“This looks more like a relief rally than an all-clear signal,” said Charu Chanana, chief investment strategist at Saxo. She said the rebound could continue if oil prices remain stable and technology companies deliver strong earnings results, but both factors remain uncertain.
U.S. stock futures rose sharply, while European futures edged lower, pointing to a mixed start for global markets.
Technology stocks, particularly semiconductor companies linked to artificial intelligence, have experienced significant volatility in recent weeks as investors question whether current valuations accurately reflect future earnings growth. Concerns have also increased over whether massive investments in AI infrastructure will generate sufficient returns.
Market attention this week will center on earnings reports from major technology companies, including Alphabet and Intel, as investors assess how geopolitical tensions and changing economic conditions are affecting business performance. Investors are also watching whether the AI investment cycle can continue despite increasingly high expectations for profits.
Recent strong results from major Asian chipmakers Samsung Electronics and Taiwan Semiconductor Manufacturing Company failed to fully satisfy investors, highlighting the challenge facing companies operating in the AI supply chain.
“Demand for AI hardware remains extremely strong, with companies struggling to keep up with supply needs, but investor expectations for earnings have become increasingly ambitious,” said Fred Neumann, chief Asia economist at HSBC in Hong Kong.
Neumann said even the AI sector was becoming vulnerable to broader economic pressures, including higher energy costs and elevated interest rates. Rising oil prices and tighter financial conditions could weigh on growth prospects and affect corporate profitability.
Meanwhile, renewed tensions between the United States and Iran have increased inflation concerns and pushed government bond yields higher. The yield on the two-year U.S. Treasury note, which closely follows expectations for Federal Reserve interest-rate decisions, stood at 4.206% during Asian trading after rising four basis points on Monday.
Market participants are currently pricing in about 33 basis points of interest-rate increases this year as investors adjust expectations for monetary policy.
The U.S. dollar remained mostly stable against major currencies as investors sought safer assets amid geopolitical uncertainty. The euro traded at $1.14145, while the Japanese yen remained weak at 162.51 per dollar, keeping markets alert for possible intervention from Japanese authorities.
The British pound continued to face pressure following comments from Andy Burnham, Britain’s seventh prime minister in a decade, which raised concerns among investors over future fiscal policy. Sterling was last trading around $1.344.
Burnham said his government would maintain existing fiscal rules while using available flexibility within those limits, a position that markets continued to assess as investors looked for signs of future economic direction.
With oil prices, geopolitical risks and AI valuations all influencing market sentiment, investors are expected to remain cautious as they await corporate earnings that could determine the next major move for global stocks.
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