Asian stock markets rallied in unison on Tuesday, with Japan and Taiwan hitting record highs, as a ceasefire deal between the United States and Iran gained momentum, easing the Middle East energy crisis that had weighed on regional equities.
Brent crude and other benchmarks plunged by as much as 6% on news that Washington and Tehran had agreed on a 60-day ceasefire, would restore Hormuz Strait traffic to pre-war levels, and would lift the ban on Iranian oil exports.
Still, caution persists, as both sides must persuade hardliners at home, and the deal is a temporary truce rather than a formal end to hostilities. Even if the Strait of Hormuz reopens immediately, some forecasts suggest normalization could be delayed until the second quarter of next year, tempering the optimism.
Brent crude, the global oil benchmark, fell more than 6% intraday, dipping below $100 for the first time in about a month since May 24. West Texas Intermediate (WTI) also dropped more than 6% intraday, sliding to the low $90s.
The decline reflects expectations that the Hormuz Strait blockade — which has weighed on global energy markets for more than 80 days since the launch of the U.S. military's "Mighty Wrath" operation on February 28 — will soon be lifted. The Washington Post reported that a memorandum of understanding (MOU) under consideration between the U.S. and Iran includes a provision to restore traffic through the strait to pre-war levels within 30 days, bolstering the optimistic outlook. Iranian outlets such as Fars and Tasnim had earlier reported similar terms in the MOU. According to the Washington Post, the agreement is also expected to include a declaration that Iran, the United States, and their allies will immediately end military operations on all fronts, including in Lebanon.
Asian countries, which had entered emergency energy mode due to the Hormuz blockade, are breathing a collective sigh of relief. Japan and Taiwan — both reliant on the Middle East for more than 90% of their energy imports — saw their stock markets set new record highs. Japan's Nikkei 225 index broke through 64,000 for the first time intraday, then surged past 65,000, closing at an all-time high of 65,158.19. The Nihon Keizai Shimbun analyzed that "expectations of easing Middle East tensions drove oil prices lower, fueling buying in artificial intelligence (AI) and semiconductor stocks."
Taiwan's Taiex also climbed 3.26% to close at 43,644.40, surpassing the previous record of 42,267.97 set just one trading session earlier on May 22. TSMC, the world's largest contract chipmaker and Taiwan's largest company by market capitalization, gained 2.44% and led the rally. Other Asian markets also advanced, with the Philippine PSEi up 0.80% and China's Shanghai Composite up 0.96%.
However, forecasts diverge on when the shock from the Hormuz blockade will be fully absorbed. Kevin Hassett, director of the White House National Economic Council (NEC), said on CBS that "one to two months after the U.S.-Iran war ends, all refineries around the world will receive the crude they need." He explained that while the timing will vary by country depending on distance from the strait, once the strait reopens, tankers will return and refineries will be replenished almost immediately.
Yet most analysts believe normalizing the Hormuz Strait, blocked for more than 80 days, will take longer. An estimated 1,500 to 2,000 vessels are reportedly stranded in the Persian Gulf, unable to exit the strait. The removal of mines believed to have been laid by Iran in the strait is another key variable. The International Energy Agency (IEA) said it could take several weeks just for the U.S. and its allies to deploy minesweeping vessels and equipment to the area. Insurers are also likely to demand convoy escorts and additional safety measures, suggesting that higher logistics costs and shipping delays will persist for some time.
Sultan Al Jaber, CEO of UAE state-owned energy company ADNOC, recently said, "Even if the conflict ends immediately, it will take at least four months for Hormuz Strait traffic to recover to 80% of pre-war levels," adding that "full normalization is unlikely before the first or second quarter of next year."
As a result, even if international oil and other energy prices fall somewhat, a swift return to pre-war levels may prove elusive. Hamad Hussain, commodities economist at Capital Economics, said, "A sustained downward trend in prices will require a real improvement in the supply-demand balance of the oil market, and that is more likely to come after 2027."
