Asian stock markets surged Friday as investors welcomed signs that tensions tied to the war with Iran could ease, offering potential relief from the conflict that has disrupted global oil flows and fueled inflation for months. Japan's Nikkei 225 jumped 1.8% to 65,814.96 after data showed May core inflation in Tokyo rose more slowly than expected, while Australia's ASX 200 climbed approximately 1%.
Wall Street's Sustained Rally
U.S. markets extended their remarkable winning streak, with the S&P 500 rising 0.2% to 7,580.06, marking its fourth consecutive all-time high, seventh straight gain, and ninth consecutive winning week—the longest such streak since 2023. The Dow Jones Industrial Average gained 0.7% to 51,032.46, while the Nasdaq composite added 0.2% to 26,972.62. For May, the S&P 500 rose 5.1% and was up 10.7% for the year.
Tech stocks powered much of the advance, with Microsoft rising 5.4% and Broadcom gaining 4.7%. Dell Technologies surged 32.8% after delivering profits that beat expectations and raising its outlook, citing strong demand for AI computing. However, not all sectors participated equally. Paramount Skydance fell 1.9%, Amazon.com dropped 1.2%, and Costco Wholesale closed 3.9% lower. Angelo Kourkafas, senior global strategist at Edward Jones, wrote in a research note, "The rally has been largely tech-led and supported by resilient earnings, but the key question is whether it can be sustained."
Energy Markets Respond to Diplomatic Progress
The U.S. and Iran were reportedly working toward a deal to extend a ceasefire, easing pressure on oil prices that have squeezed consumers and businesses for months. Brent crude for August delivery fell 1.7% to settle at $91.12 per barrel, while benchmark U.S. crude oil for July delivery fell 1.7% to settle at $87.36. Despite the decline, Brent remained well above the $70 per barrel level in late February before the war began.
The war has stifled the flow of oil shipments through the Strait of Hormuz, through which roughly a fifth of the world's oil and natural gas is shipped. The conflict has pushed up gasoline prices and a wide range of goods, feeding inflation and squeezing consumers and businesses. Prices were already rising before the war began because of the ongoing impact of tariffs.
Inflation Pressures Mount
Several reports this week showed inflation's rise and its impact on consumers. A measure of inflation preferred by the Federal Reserve accelerated in April to its highest level in three years, and consumer confidence is slipping amid the squeeze from rising inflation. Treasury yields held relatively steady, with the 10-year Treasury slipping to 4.44% from 4.45% late Thursday.
The Federal Reserve has been holding its benchmark interest rate steady as it watches inflation and is expected to continue holding rates steady at its next meeting in June and through the year, according to CME's FedWatch tool. Cutting rates could lower borrowing costs and help the economy, but it could also worsen inflation. Companies in the S&P 500 have reported profit growth of 28% overall for the most recent quarter, according to FactSet, and the overwhelming majority have already reported their latest results. Markets in Europe and Asia mostly rose.
Why This Matters:
The potential easing of Middle East tensions offers critical relief for an economy already strained by inflation running at three-year highs. The conflict's disruption of oil flows through the Strait of Hormuz—a chokepoint for a fifth of global oil and gas shipments—has compounded price pressures that began with tariff impacts, creating a dual squeeze on household budgets and business margins. The Federal Reserve's cautious stance reflects the difficult balancing act between supporting economic growth and preventing inflation from becoming entrenched. While corporate earnings remain robust with 28% profit growth, the sustainability of market gains depends on whether diplomatic progress can durably lower energy costs and whether the Fed can eventually reduce borrowing costs without reigniting price increases. For investors and consumers alike, the path forward hinges on geopolitical stability and prudent monetary policy.