Asian equity markets advanced on Monday, buoyed by continued appetite for semiconductors and AI hardware despite renewed geopolitical friction in the Middle East that pushed oil higher. Investors remained focused on the ongoing AI-driven technology cycle even as a lack of clear progress in Gulf peace talks kept energy-related risks elevated.
Officials from Washington and Tehran are reported to be negotiating toward a potential agreement, but President Donald Trump has not commented publicly on any advances. The tenor of U.S. public comments has been mixed - Defense Secretary Pete Hegseth said on Saturday the United States would be prepared to resume attacks on Iran should talks fail. At the same time, military action by Israel further into Lebanon in operations against the Iranian-backed Hezbollah group added to regional tensions.
Market economists cautioned that while some of the most acute near-term global economic risks could ease if tanker traffic through key waterways resumes, lasting impacts on energy markets may persist. Michael Feroli, head of U.S. economics at JPMorgan, said that should tankers be able to move again the acute risk phase for the global economy should be over, but he added that oil prices were likely to remain elevated as inventories are rebuilt and Middle East supply infrastructure is repaired.
Oil benchmarks reflected the elevated risk premium. Brent crude pushed up 1.9% to $92.89 a barrel, while U.S. crude gained 2.4% to $89.46.
Regional equity indices were supported by continued strong flows into technology hardware and semiconductor stocks tied to artificial intelligence. Japan’s Nikkei rose another 0.5% after nearly a 5% gain last week that took the index to all-time highs. South Korea’s market climbed 1.3% on Monday after an 8% advance the prior week, and Taiwan, which rallied almost 6% last week, remained a focus for investors.
MSCI’s broadest index of Asia-Pacific shares outside Japan added 0.2%.
Market attention in Taiwan was heightened as Nvidia’s chief executive, Jensen Huang, was scheduled to open the Computex trade show with remarks on AI and the company’s latest products, while underscoring the island’s central role in the global semiconductor ecosystem.
In Europe and U.S. futures, the tone was mixed ahead of a string of economic releases. EURO STOXX 50 futures declined 0.3%, DAX futures eased 0.2% and FTSE futures lost 0.5%. On the other side of the Atlantic, S&P 500 futures were 0.2% higher and Nasdaq futures strengthened 0.4% after benchmark indexes posted records last week.
Despite broad headline gains, the advance has been concentrated. The AI-linked largest 10 companies account for roughly 40% of the S&P 500 by market capitalization, and only 21 stocks in the index were at record highs. Sector divergence was notable: technology equities climbed nearly 16% during May, while consumer discretionary and healthcare managed little more than 2% gains, and consumer staples fell over 3%.
Fixed income markets have been sensitive to the inflationary pressure from higher oil. The U.S. 10-year Treasury yield rose 3 basis points to 4.470% on Monday. Market-implied probabilities put roughly a 50-50 chance on the Federal Reserve needing to raise interest rates by year-end to dampen rising inflation expectations.
A number of Federal Reserve officials are scheduled to speak this week, and key macro releases include the ISM manufacturing survey and the May payrolls report due on Friday. Consensus market forecasts expect payrolls to rise by about 85,000 in May and for the unemployment rate to remain unchanged at 4.3%. A materially stronger jobs print would likely shift market odds further toward an additional rate increase.
The dollar remained generally firm, reflecting the market’s hawkish tilt. The yen and euro continued to face headwinds from their regions’ dependence on energy imports. The dollar traded around 159.42 yen, with market participants mindful of the potential for Japanese authorities to intervene if the yen breaches the 160.00 level. The euro was near $1.1645, holding within a narrow range between $1.1585 and $1.1661 over the past week.
In commodities, gold was little changed and was quoted around $4,535 an ounce, finding limited traction either as a safe-haven or as an inflation hedge.
What to watch this week
- Speeches from several Federal Reserve officials and the ISM manufacturing survey.
- May labor market data on Friday, with payrolls consensus at 85,000 and an unchanged unemployment rate forecast of 4.3%.
- Nvidia’s Computex keynote in Taiwan and ongoing developments in semiconductor and AI hardware demand.