Asian Stocks Steady as Market Caution Prevails on Middle East Uncertainty

Asian equities trade sideways as uncertainty over the United States (US)–Iran peace talks limits risk appetite. At the time of writing, Japan’s Nikkei 225 is 0.03% higher to near 53,623, while Hong Kong’s Hang Seng Index is up 0.88 to 25,074, and the SSE Composite Index gains 0.75 to 3,920. However, Kospi is down 0.59% to near 5,430.

President Donald Trump said Washington would pause attacks on Iran’s energy sector for 10 days at Tehran’s request. However, Iran denied making such a request, underscoring fragile diplomacy and the low likelihood of a near-term ceasefire. Elevated oil prices have intensified inflation concerns, reinforcing hawkish expectations for central banks.

A growing number of Asia-Pacific governments are moving to stabilize financial markets and support liquidity as the prolonged conflict pressures regional currencies and drives broader volatility.

Japanese equities have recovered intraday losses but remain exposed to downside risks following the previous session’s decline and a sharp selloff on Wall Street, driven by skepticism over Iran negotiations. The Bank of Japan (BoJ) is expected to highlight potential volatility in underlying inflation in next month’s quarterly report, according to former executive Kazuo Momma, as the Middle East conflict complicates policy decisions.

The Japanese government will use JPY 800 billion ($5 billion) in reserves to fund gasoline subsidies, costing up to JPY 300 billion monthly. Meanwhile, South Korea plans a 5 trillion Won bond buyback to inject liquidity and cap rising yields after three-year government bond yields climbed to their highest level since mid-2024.