03/04/26, Asian stocks advanced at the end of another volatile week fueled by the Middle East conflict. Trading is set to be muted with a number of regional markets shut for holidays. MSCI's benchmark Asia Pacific Index gained as much as 1% after the S&P 500 Index reversed an earlier loss of 1.5% to close 0.1% higher. Stocks rallied after oil prices eased off their highs following a report that Iran is drafting a protocol with Oman to monitor traffic through the Strait of Hormuz, having effectively shut it down since the start of the war.

 “The improvement in U.S. risk appetite has spilled over” into regional equities, said Hitoshi Asaoka, chief strategist at Asset Management One Co. in Tokyo. “While oil prices may not fully return to previous levels, if they do partially normalize, there is considerable room for a rebound from a liquidity perspective.”

The dollar was mixed against its major peers, while Treasury futures were little changed in Asia with the cash market shut until US hours for a half day of trading.

Asian markets closed Friday include Australia, New Zealand, Hong Kong, Singapore, the Philippines and Indonesia. US stock markets will be shut for a holiday for Good Friday, though the government is still scheduled to publish a slate of economic data, including the March nonfarm payrolls report.

US stocks started off Thursday deep in the red after a speech from Trump late Wednesday did little to reassure investors that the war in the Middle East was nearing a swift resolution, though he has previously set a two-to-three-week timeline for ending the conflict. On Thursday, the president issued fresh threats on Iranian infrastructure in a bid to pressure Tehran in negotiations.

“The upshot is that markets remain uncertain as to how long the acute disruptions we are seeing to global energy supplies will persist,” James McCann, a senior economist at Edward Jones wrote in a note. “Against this backdrop, sentiment will likely remain headline-driven in coming sessions, with volatility likely to remain elevated over the short term at least.”

Oil rallied above $110 a barrel Thursday after Trump vowed an escalation in the war in Iran over the coming weeks. West Texas Intermediate surged 11%, while the global Brent benchmark settled near $109. Europe's diesel futures benchmark climbed above $200 a barrel for the first time since 2022.

War Pattern

The higher close for the S&P 500 on Thursday ran counter to a pattern of late-week selloffs that have hit the market ever since the war began, as nervous investors unwind positions that could be upended if weekend developments threaten to worsen the hit to the global economy.

“While assets gyrate on every new headline, until a clear agreement is achieved with a palatable plan for reopening the Strait, there'll be downward pressure on economic growth and upward pressure on headline inflation,” said Max Gokhman, deputy CIO, Franklin Templeton Investment Solutions. “That spells indigestion for both equity and bond investors.”

Tesla Inc. shares fell after the company posted one of its worst sales quarters in years, missing Wall Street's expectations, as it struggles to turn around its core business and navigate an increasingly challenged electric-vehicle market.

US labor-market data on Thursday gave mixed signals. A report from Challenger, Gray & Christmas Inc. showed a 25% increase in job-cut announcements in March from the previous month. Meanwhile, initial jobless claims unexpectedly fell in the week through March 28.

Report by  Bloomberg