Asian Markets Rally on Iran Ceasefire Hopes as US-Iran Tensions Simmer

Japanese and South Korean stock markets edged higher during thin holiday trading on Monday, buoyed by renewed optimism surrounding a potential ceasefire between the United States and Iran. Trading activity remained muted as markets across Hong Kong, mainland China, and Australia stayed closed for public holidays.

Japan's Nikkei 225 gained 1.4%, while the broader TOPIX index advanced 0.7%. South Korea's KOSPI rose 1.1%, reflecting improved investor sentiment across the region. Singapore's Straits Times Index posted modest gains of 0.3%, though India's Nifty 50 dipped 0.4%, bucking the broader Asian market trend.

The positive momentum followed a report from Axios indicating that the US, Iran, and several regional mediators — including Pakistani, Egyptian, and Turkish intermediaries — were actively negotiating terms for a potential 45-day ceasefire. Analysts suggest this preliminary agreement could serve as a stepping stone toward a more comprehensive resolution to the ongoing conflict. However, prospects of reaching even a partial deal within 48 hours remained uncertain.

US stock futures, which had initially declined during Asian trading hours, trimmed losses on the back of the diplomatic developments.

The ceasefire talks emerged against a backdrop of escalating pressure from US President Donald Trump, who issued a firm deadline requiring Iran to reopen the Strait of Hormuz by Tuesday at 8 p.m. Eastern Time. Trump warned that failure to comply could result in strikes on critical Iranian infrastructure, including power plants and bridges.

Oil prices climbed further in Asian trade following sharp gains late last week, though they pulled back slightly after the ceasefire report emerged. Persistently high crude prices remain a key concern for energy-importing Asian economies, as rising import costs threaten to squeeze growth and fuel inflation across the region.