Japanese equities rallied after US President Donald Trump signaled · the US is close to signing a deal with Iran, fueling expectations that the Middle East conflict is nearing an end.
The Nikkei 225 Stock Average rose 2.8%, the most since May 25, to 66020.04 as of market close in Tokyo, with chip gear suppliers Tokyo Electron Ltd. and Disco Corp. among companies leading gains. The broader Topix climbed 1.4% to 3881.96, marking its first rise in three days. Electronics and banks contributed most to gains on the Topix.
Oil tumbled after Trump said a peace deal with Iran could be signed as soon as the weekend. He said the US has “ended the war with Iran” in comments at a virtual campaign rally.
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“Sentiment has improved as a result of Trump’s comments — investors are moving on the assumption that a deal is within reach,” said Koji Takeuchi, a senior research fellow at Itochu Research Institute. “But there’s a risk of sentiment collapsing if expectations for a deal aren’t met,” he warned.
The current risk-on mood is a particular tailwind for AI and tech stocks as many had been sold off this week amid worries about heightening tensions in the Middle East, Takeuchi added. Memory chipmaker Kioxia Holdings and chip tester manufacturer Advantest Corp. both gained more than 7%.
Trump said his proposed agreement with Iran involves reopening the Strait of Hormuz, which helped lift investors’ mood, although Iranian media said Tehran has not approved any deal.
“Boy who cried wolf or not, markets took Trump’s comments at face value and roared back into risk assets,” said Andrew Jackson, head of Japan equity strategy at Ortus Advisors.
Concerns about the supply chain impact of disruptions in the Strait of Hormuz have been weighing on the shares of Japanese manufacturers like automakers in recent months. Before the conflict, Japan relied on the Middle East for more than 90% of its crude oil imports. Shortages of key oil products like naphtha have triggered price hikes and production halts in Japan since the war broke out.
Elon Musk’s SpaceX raised $75 billion in its initial public offering Thursday, making it the biggest IPO ever. The stock is set to begin trading in the US on Friday.
Many investors likely sold other assets to buy into the SpaceX IPO, said Takeuchi. “Now that it’s wrapping up, some of those supply-demand pressures will ease,” providing equities with an extra tailwind, he said.
Read more: Japan’s Retail Investors Flock to SpaceX After IPO Drought