Asian shares rose on Thursday as semiconductor stocks recovered after a period of heavy selling. However, gains were capped by another surge in oil prices, which reignited inflation concerns and put pressure on global bond markets.

Oil prices climbed for a third consecutive session after President Donald Trump said the interim agreement with Iran to end the war was “over.” The U.S. military also continued launching fresh strikes against Iran for a second day, with the aim of keeping the Strait of Hormuz open for shipping traffic.

Oil Prices Rise Sharply as Inflation Concerns Return

Brent crude rose 0.8% to $78.65 per barrel and was up around 9% for the week. During the session, oil prices briefly moved above $80 per barrel for the first time since June 22.

Although Trump later said he did not expect the conflict to turn into a full-scale war, markets remained cautious. Tensions in the Gulf region, particularly around the Strait of Hormuz, continue to be a sensitive factor for global energy prices.

The rise in oil prices also increased concerns that inflation could remain elevated for longer, prompting markets to raise expectations that the Fed may need to continue tightening policy. Fed funds futures now imply around 38 basis points of rate hikes this year.

Chip Stocks Help Asian Markets Recover

Despite pressure from higher oil prices, semiconductor stocks helped Asian markets recover notably.

MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.8%. Japan’s Nikkei gained 2.3%, ending a three-day losing streak.

In South Korea, the KOSPI jumped 3.8%, supported by a 3.6% gain in Samsung and a 7.5% surge in SK Hynix. Investors stepped in to buy after the recent sell-off in chipmakers.

Earlier on Wall Street, the Nasdaq managed to post a slight gain of 0.2%. Nvidia shares rallied 3.6% after reports that China may allow its top AI companies to buy a limited number of Nvidia’s H200 chips.

Markets Still Expect the Conflict Could De-Escalate

According to Chris Weston, Head of Research at Pepperstone, markets still appear to lean toward the view that the Iran conflict will eventually de-escalate and that negotiations may resume around a memorandum of understanding.

However, he also emphasized that the situation remains highly uncertain. Investors need to stay flexible, as market volatility and timing remain very difficult to predict.

Global Bonds Come Under Pressure

The rise in oil prices and renewed inflation concerns continued to weigh heavily on global bond markets.

Japan’s 10-year government bond yield rose 1.5 basis points to 2.880%, its highest level since September 1996. Australia’s 10-year government bond yield climbed 4 basis points to 4.924%, the highest level since early June.

In the United States, the benchmark 10-year Treasury yield rose another 2 basis points to 4.5852% on Thursday, after gaining 4 basis points in the previous session. For the week so far, the yield has risen by around 10 basis points.

Fed Signals Greater Caution on Inflation

The Fed meeting minutes showed that policymakers are increasingly concerned about inflation pressure. Some members said there was already a case for raising borrowing costs, although the Fed ultimately agreed to keep rates unchanged at last month’s meeting.

This reinforces the view that if oil prices continue rising and inflation fails to cool, the Fed may maintain a more hawkish stance in the period ahead.

U.S. Dollar Reaction Remains Limited

In currency markets, the reaction was relatively muted. The U.S. dollar failed to hold on to support from higher bond yields and fell 0.2% to 162.38 yen.

This level remains close to the 40-year peak of around 162.84 yen, keeping speculators cautious about the possibility of Japanese authorities intervening to support the yen.

Conclusion

Asian shares recovered as investors returned to semiconductor stocks, particularly chip names in Japan and South Korea. However, market gains remained limited by the sharp rise in oil prices and the risk of renewed inflation as Gulf tensions escalated.

In the short term, investors will continue to monitor developments around the Strait of Hormuz, oil prices, bond yields, and policy signals from the Fed. If geopolitical tensions persist, pressure on bond markets and rate expectations could continue to increase.

Source: Reuters