Oil prices jump after Iran says critical Strait of Hormuz to remain shut
Asian markets responded to a clear easing of geopolitical tail risk after Donald Trump signaled a retreat from threatened tariffs on several European countries, citing progress toward a framework agreement on Greenland.
The removal of an imminent trade shock mattered less for its specific policy details, which remain undefined, than for what it represented for global risk pricing. Investors interpreted the shift as a reduction in near-term transatlantic friction, prompting a broad reallocation out of defensive positioning and back into growth-sensitive assets across the region.
Equities reflected that recalibration quickly. Japan led the advance, with the Nikkei Stock Average rising 1.9%, supported by strong gains in semiconductor-related shares, while South Korea’s Kospi added 1.8%. Australia’s S&P/ASX200 climbed 0.6%.
The reaction was not uniform, as Hong Kong’s Hang Seng Index slipped 0.2% and China’s Shanghai Composite Index edged 0.1% lower, underscoring that relief over trade tensions does not override persistent regional growth and policy concerns.
Safe-haven demand faded as risk appetite improved. Spot gold fell 0.7% to $4,797.60 per troy ounce, reflecting reduced urgency to hedge geopolitical outcomes as markets priced a lower probability of escalation. In fixed income, Japanese government bonds stabilized after recent volatility, with the 10-year yield down 1.5 basis points to 2.270% ahead of the Bank of Japan policy decision.
The market consensus remains that the Bank of Japan will keep rates unchanged, though the combination of a weak yen and potential fiscal expansion continues to anchor expectations that the next policy move will still be toward tightening rather than easing.
Currency and commodity markets echoed the same theme. Oil prices firmed modestly on improved demand sentiment, with front-month WTI up 0.2% at $60.74 per barrel and Brent 0.1% higher at $65.32.
In foreign exchange, the Australian dollar rose 0.5% to $0.6792 after a decline in December unemployment reinforced expectations that the Reserve Bank of Australia could move toward a rate increase as soon as next month, adding a domestic policy catalyst to the broader risk-on tone.
The base case for investors is that the absence of immediate tariff action allows Asian risk assets to remain supported, with attention shifting back to central bank guidance, particularly from the Bank of Japan and the Reserve Bank of Australia. The key risk scenario is that the Greenland framework fails to translate into a durable agreement, reviving trade threats and quickly restoring demand for havens such as gold and government bonds.