Asian rally cools as BOJ hikes rate to highest since 1995

Bank of Japan raised its benchmark rate by 25 basis points to 1%, its highest since 1995, as Asian markets cooled after Monday’s global rally.youtube
The Dow Jones Industrial Average closed at a record Monday after the US and Iran announced a preliminary deal to end hostilities and reopen the Strait of Hormuz.marketwatch
Oil prices hit three-month lows, with Brent crude dropping sharply, though analysts warn mine clearance could take weeks before shipping resumes.bbc

Global Markets Rally as US-Iran Deal Signals Reopening of Strait of Hormuz

Stock markets around the world surged on Monday as investors welcomed a preliminary agreement between the United States and Iran to end hostilities and reopen the Strait of Hormuz, the vital shipping lane that carries roughly 20% of the world’s oil and liquefied natural gas supply.

The Dow Jones Industrial Average rose 468.77 points, or 0.9%, to close at 51,671.03 — a record finish and its 16th of the year. The S&P 500 and Nasdaq Composite also posted sharp gains, with the Philadelphia Semiconductor Index climbing more than 5% as chip stocks led the advance. Oil prices fell sharply, with Brent crude dropping over 5% to around $82.91 per barrel and U.S. crude declining to approximately $80, both reaching their lowest levels since the early days of the conflict.youtube

The Deal

The agreement, announced Sunday by President Trump on Truth Social and confirmed by Iran’s deputy foreign minister and Pakistani Prime Minister Shehbaz Sharif, extends a fragile ceasefire by 60 days and commits both sides to lifting their respective blockades of the strait. A formal signing ceremony is scheduled for Friday, June 19, in Switzerland.npr

Under the memorandum of understanding, Iran has agreed not to develop nuclear weapons and to halt further uranium enrichment, while the U.S. would release $25 billion in frozen Iranian assets and lift existing sanctions. However, Reuters reported that key issues — including the fate of Iran’s 12 tons of enriched uranium — remain unresolved and will require further negotiation.reuters

Asia Cools After Initial Euphoria

By Tuesday, the rally began to moderate in Asia as attention shifted to central bank decisions. The Bank of Japan raised its benchmark interest rate by 25 basis points to 1%, its highest level since 1995. South Korea’s Kospi extended gains, with semiconductor names continuing to benefit from renewed risk appetite, while Japanese equities rebounded after the widely expected BOJ move.reuters

London’s FTSE 100 lagged its European peers on Monday, weighed down by heavy losses in Shell and BP, which fell 4.4% and more as falling crude prices eroded their earnings outlook.ajbell

Strait Still Closed — For Now

Despite the diplomatic breakthrough, shipping industry officials cautioned that the strait has not physically reopened. Vessels near the waterway remain stationary, awaiting mine clearance that could take weeks to months. Andrew Lipow of Lipow Oil Associates estimated it could take 30 to 45 days to restore stable tanker movements through the passage. Trump acknowledged the timeline, stating the strait would formally reopen “upon the signing on Friday for purposes of mine removal”.nypost