Global capital markets registered mixed movements Monday as U.S.-Iran negotiations progressed, with oil prices dipping and technology stocks surging to new records, revealing how geopolitical conflict and its resolution directly translate into profit and loss for investors.
Tokyo’s Nikkei 225 index jumped 1.6%, closing at an all-time record of 72,353.96. This surge was primarily led by technology stocks, fueled by investor excitement over the global artificial intelligence boom. Japan’s SoftBank Group, a multinational investment holding company with a significant focus on AI, saw its shares rise by 1.9%. Chip equipment maker Tokyo Electron also experienced a substantial gain, with its stock up 3.2%.
South Korea’s Kospi index similarly gained 0.7%, reaching a record closing high of 9,114.55. This increase was also attributed to AI-related shares, with memory chip maker SK Hynix surging 5.6%. Both the Nikkei 225 and Kospi indexes have seen significant appreciation over the past six months, rising more than 40% and 120% respectively, consistently setting new records driven by AI enthusiasm and developments surrounding the Iran war.
Capital's War Dividend Shifts
While technology capital saw record gains, oil prices edged lower on fresh optimism regarding the U.S.-Iran negotiations. Brent crude, the international standard for oil, was trading 1.1% lower at $79.70 per barrel. This price represents a shift from roughly $70 a barrel before the start of the Iran war in late February, illustrating the war premium embedded in commodity prices.
Neil Newman, managing director and head of strategy at Astris Advisory Japan, commented on the market's performance, stating, “We’re seeing another strong market today.” However, Newman cautioned that the Japanese market is “probably getting a little stretched” from an investor’s perspective, particularly “with what’s going (on) in the Middle East.” This highlights the speculative nature of capital, constantly weighing geopolitical instability against potential returns.
High-level negotiations in Switzerland between the U.S. and Iran concluded early Monday, with lower-level technical talks scheduled for the remainder of the week. Mediators Qatar and Pakistan reported that “encouraging progress” was made during these discussions, which directly influenced global commodity markets.
The State's Role in Resource Control
Amidst the talks, Iran stated that the Strait of Hormuz, a critical waterway for global oil and gas transport, was shut again over the weekend. Conversely, the U.S. maintained that traffic had continued through the strait. This dispute over control of a vital chokepoint underscores the strategic importance of the region for global capital flows and the state's role in asserting or challenging that control.
ING commodities strategists Warren Patterson and Ewa Manthey wrote in a commentary that “Moving towards a more permanent deal will be challenging, with very real risks of a flare-up in hostilities.” This assessment reflects the inherent instability of geopolitical arrangements that impact resource extraction and transport, and the constant threat to the smooth functioning of global capital.
Thomas Mathews, head of Markets, Asia Pacific of Capital Economics, noted that energy flows in the strait are more likely to recover only gradually. Mathews wrote that “With the controversial — and fragile — U.S.-Iran peace process now underway, attention is turning to how quickly tankers return to the Strait of Hormuz to load energy supplies.” This perspective foregrounds the primary concern of capital: the unimpeded movement of commodities for profit.
Elsewhere in Asian markets, Hong Kong’s Hang Seng index lost 0.6% to 23,785.50, and Australia’s S&P/ASX 200 was down 0.1% to 8,816.10. The Shanghai Composite index, however, was 1.8% higher at 4,163.10, Taiwan’s Taiex rose 2.8%, and India’s Sensex was up 0.4%. U.S. futures were trading lower, indicating a broader uncertainty in Western markets.
In currency markets, the U.S. dollar rose to 161.76 Japanese yen from 161.22 yen, while the euro was trading at $1.1445, down from $1.1473. Investors in the U.S. are also monitoring May’s personal consumption expenditures price index (PCE), the preferred inflation gauge of the Federal Reserve, which is due to be released Thursday. This metric is crucial for the state's central bank in managing the economic conditions favorable to capital accumulation.