Japanese Stock Exchange Soars, Nikkei Up 5 Percent After US-Iran Deal News

TOKYO - Japan's stock market immediately reacted positively to news of a de-escalation of the conflict in the Middle East. The Nikkei index jumped more than 5 percent in morning trading on Monday and set an intraday record high after the United States and Iran announced an initial agreement to end the war through a memorandum of understanding.

According to a Kyodo News report quoted on Monday, June 15, the spike shows how sensitive the global market is to geopolitical developments, especially those related to the Middle East conflict and the world's energy supply.

The Nikkei 225 index closed the morning trading session up 3,573.60 points or 5.41 percent compared to Friday's trading to 69,593.64. The index even touched an all-time high during trading at 69,682.23.

Meanwhile, the broader index, the Topix, rose 140.38 points or 3.62 percent to 4,022.34, after reaching an intraday record high at 4,032.39.

In the Tokyo foreign exchange market, the US dollar was moving around the 160 yen level. The strengthening of investor interest in risky assets is making demand for safe assets or safe havens - such as currencies that are usually hunted when global conditions are uncertain - begin to subside.

At midday, the dollar was trading in the range of 160.14-160.15 yen, compared with 160.15-160.25 yen in New York and 160.27-160.29 yen in Tokyo at Friday's close.

The euro was recorded at 1.1599-1.1600 US dollars and 185.75-185.79 yen, compared to the previous position in New York at 1.1560-1.1570 US dollars and 185.28-185.38 yen.

Almost all stock sectors strengthened after US President Donald Trump said through social media before the market opened that an agreement on the Middle East crisis had been reached. The statement was later acknowledged by Iran.

Investor optimism was also triggered by the hope that crude oil prices, which had previously soared due to tensions in the region, would begin to fall after the Strait of Hormuz reopened. The benchmark West Texas Intermediate (WTI) crude oil price has fallen to around $80 per barrel.

Although the market responded positively, a number of analysts reminded that the situation in the Middle East still needed to be watched until the official agreement was signed.

"Because this situation has undergone many changes, we must continue to pay attention to developments in the Middle East until the agreement is signed on June 19," said Wataru Akiyama, a strategist from Nomura Securities' Investment Content Department, as quoted by Kyodo News.