When the news broke in the early hours of April 8 that the United States and Iran had agreed to a two-week ceasefire, Asia’s financial markets did what markets tend to do when they have been holding their breath for six weeks: they exhaled, loudly and all at once.
South Korea’s KOSPI surged 7.1%, closing at 5,872. Japan’s Nikkei 225 rose 5.4%, closing at 56,308 — a level that, at the height of the war, had seemed distant. Taiwan’s TAIEX jumped 4.6%. India’s Nifty 50 gained 3.65%. Hong Kong’s Hang Seng, returning from a long holiday weekend, climbed 3.1%. Australia’s ASX 200 rose 2.6%. Markets in Vietnam, Indonesia, and the Philippines each gained more than 2%. The MSCI index of Asia-Pacific shares outside Japan went on to record its best week since November 2022 — a 7.3% gain over five trading days — as ceasefire optimism built through the week.
Oil, which had been trading above $100 a barrel and had briefly spiked past $120 during the worst weeks of the conflict, plunged below $100 on ceasefire day. West Texas Intermediate and Brent crude both fell more than 13% in a single session — Brent’s steepest one-day drop since 2020. Futures tied to the Dow Jones Industrial Average rose 718 points. S&P 500 futures added 1.6%. It was, in the language of financial markets, a risk-on moment: the kind of broad, synchronized relief rally that only happens when something genuinely frightening appears to be ending.
But beneath those numbers, a more cautious story was developing — one that the headline indices had not yet fully absorbed.
Why Asia Was So Exposed
To understand the scale of the ceasefire relief, it helps to understand the scale of the preceding shock. The Strait of Hormuz, the narrow waterway between Iran and Oman through which roughly 20 million barrels of oil flow every day — approximately one fifth of the world’s supply — had been effectively closed since early March. Iran militarised the strait at the start of the conflict and allowed only a trickle of vessels to transit, reportedly after individual negotiations and payment of fees in Chinese yuan. At least 800 ships were trapped in the Gulf as a result.
For Asia, this was not an abstract geopolitical problem. China, India, Japan, and South Korea collectively account for 75% of the region’s oil exports and 59% of its LNG exports that would normally pass through Hormuz. Japan and South Korea, which have no domestic oil production worth speaking of, were among the most acutely exposed economies in the world. Both had seen their energy costs surge, their currencies weaken, and their central banks caught in the impossible position of needing to both combat inflation and support growth — in opposite directions.
Governments across the region had already moved into crisis management. Fuel rationing had been introduced in multiple countries. Coal plants that had been scheduled for decommissioning were quietly reopened. Bans on refined fuel exports were imposed to protect domestic supplies. Singapore, one of the world’s most trade-dependent economies, had announced nearly a billion Singapore dollars in emergency relief measures. The Philippines declared a state of emergency. Countries from Bangladesh to Zimbabwe faced severe fuel shortages.
The International Energy Agency called the disruption the “greatest global energy security challenge in history.” Against that backdrop, the ceasefire was not merely a financial event. It was a lifeline.
The Ambiguity at the Heart of the Deal
And yet, as the celebration in Asian markets unfolded, the actual terms of the ceasefire remained worryingly unclear on the question that mattered most: the Strait of Hormuz.
President Trump said the ceasefire was conditional on the “complete, immediate, and safe opening” of the strait. Iran’s foreign minister, Abbas Araghchi, described passage as “possible via coordination with Iran’s armed forces” — a materially different statement that implied Iranian authority over the waterway remained intact. An unnamed regional official told the Associated Press that the deal allowed both Iran and Oman to charge transit fees. The few vessels that had crossed the strait in recent weeks had reportedly done so after direct negotiations with Tehran and payment of fees denominated in Chinese yuan.
The gap between Trump’s framing and Iran’s framing was more than semantic. Trump was describing a strait that belonged to no one’s veto. Iran was describing a strait that still belonged to its control — reopened, conditionally, at a price. One week after the ceasefire announcement, marine traffic through the strait remained at well below 10% of pre-war volumes, with just a handful of vessels transiting per day compared to the pre-war daily average of 135. Iran had also acknowledged losing track of mines it planted in the waterway during hostilities, meaning even a political agreement to reopen could not immediately translate into safe navigation.
“The Strait of Hormuz remains largely closed to shipping,” the Business Standard noted in its coverage of the week’s Asian trading. “Marine traffic at well below 10% of normal volumes as Tehran asserted its control of the strategic waterway.” President Trump, posting on Truth Social, said Iran was doing a “very poor job” of allowing oil to pass through.
The Rally’s Fragile Foundation
The market strategist community was clear-eyed about what the rally was — and what it was not. “Asian markets are pricing in a ceasefire extension that does not yet exist,” said Oriano Lizza, a sales trader at CMC Markets in Singapore. “The Nikkei has soared past its February record, while Brent crude has steadied above $94 per barrel after whipsawing at the start of the week. These moves have relied on diplomatic signals rather than a signed deal. That sets up real risk in current market positions.”
Bloomberg’s Asia team leader for markets, Garfield Reynolds, put it plainly: “The US-Iran conflict has clearly calmed down, but there’s very little sign of that leading to a serious resumption in flows of materials out of the Strait of Hormuz. That signals strong potential for crude futures to climb back above $100 a barrel and for equities to retreat from this week’s advance to records.”
Josh Rubin, portfolio manager at Thornburg Investments, explained the internal logic of the rally even while flagging its risks: “For longer, energy prices were destined to be fairly inflationary around the world. And if there’s now a bit of a belief or some visibility that energy prices can come back down, that’s better for inflation, better for the outlook of central bank cuts.” That conditional framing — “if there’s now a bit of a belief” — is the crucial qualifier. Markets were trading on the prospect of normalisation, not normalisation itself.
The sector patterns within the rally were revealing. In Asia, industrials and materials led gains, with Chinese battery giant CATL surging 9.5% ahead of its April 15 earnings. Japan and South Korea — the two markets most severely sold off during the conflict due to their acute energy import dependence — staged the sharpest ceasefire recoveries. The Bank of Korea, meeting on the Friday of ceasefire week, kept its policy rate steady while warning explicitly that “the broadening conflict in the Middle East threatens to derail growth and worsen inflation.” It was a central bank simultaneously welcoming the ceasefire and refusing to believe it was over.
What Comes Next for Asia’s Markets
The ceasefire that lit up Asian markets in early April is now approaching expiration, with the two-week truce set to expire around April 21. The first round of formal US-Iran talks in Islamabad collapsed after 21 hours, with uranium enrichment remaining the central obstacle. A second round is being arranged, with Pakistan and Turkey both serving as intermediaries, but no date has been confirmed.
Oil at current levels — hovering around $94-$98 a barrel — remains far above the pre-war level of roughly $70. Energy inflation is embedded in consumer price indices across Asia. Even if Hormuz fully reopens, the IEA has warned it will take time for energy exporters to rebuild infrastructure damaged during the conflict, and for supply chains to normalise from six weeks of near-total disruption.
Asia’s April 8 rally was real, justified, and entirely understandable. It was the sound of a region that had been genuinely frightened, experiencing genuine relief. The question now is whether the relief has run ahead of the resolution — and whether the markets that rose fastest on the ceasefire news are the ones most exposed if the second round of talks in Islamabad does not produce what the first round could not.
Written by Shalin Soni, CMA specializing in financial analysis, global markets, and corporate strategy, with hands-on experience in financial planning and analytical decision-making.
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Source: Based on Fortune and publicly available information.
Disclaimer
This article is based on publicly available information, market developments, and credible media reports. The content is intended for informational and analytical purposes only and should not be considered financial, investment, or legal advice.