GLOBAL MARKETS: Asia stocks count on AI boom to offset Gulf risks

SYDNEY — Asian stock markets advanced on Monday as continued enthusiasm for artificial intelligence (AI) and semiconductor-related investments helped offset concerns over rising geopolitical tensions in the Middle East.

Investor sentiment remained supported by strong demand for AI technologies, even as uncertainty persisted over negotiations between the United States and Iran. While diplomats from Washington and Tehran continue efforts to reach an agreement, U.S. President Donald Trump has remained largely silent on the status of the talks. Meanwhile, Defense Secretary Pete Hegseth stated over the weekend that the United States was prepared to resume military action against Iran if negotiations fail.

Regional tensions were further heightened by Israel's expanded military operations in Lebanon against the Iran-backed Hezbollah militant group.

According to Michael Feroli, Chief U.S. Economist at JPMorgan, the most severe risks to the global economy may have eased if oil tankers are able to resume normal operations through the Strait of Hormuz. However, he cautioned that oil prices are likely to remain elevated as inventories are replenished and damaged energy infrastructure in the Middle East undergoes repairs.

Oil prices moved higher amid the ongoing uncertainty. Brent crude rose 1.9% to $92.89 per barrel, while U.S. West Texas Intermediate crude gained 2.4% to $89.46 per barrel.

Asian equities continued to benefit from strong technology-sector performance. Japan's Nikkei 225 climbed 0.5% after reaching record highs last week. South Korea's benchmark index advanced 1.3%, building on an 8% surge from the previous week, while Taiwan's stock market also maintained strong momentum. MSCI's broad Asia-Pacific index outside Japan added 0.2%.

Attention is focused on Taiwan, where Nvidia Chief Executive Officer Jensen Huang opened the Computex technology conference with a keynote address highlighting the latest developments in AI and the critical role Taiwan plays in the global semiconductor supply chain.

In Europe, stock futures pointed to a softer opening, with EURO STOXX 50, DAX, and FTSE futures posting modest declines. In contrast, U.S. futures remained positive, with both the S&P 500 and Nasdaq futures edging higher after reaching record levels last week.

Despite the recent gains, market strength remains concentrated among a relatively small group of major technology companies. AI-related firms continue to dominate performance, while other sectors, including consumer discretionary and healthcare, have posted more modest gains. Consumer staples stocks have lagged behind.

Higher oil prices have also contributed to concerns about inflation, putting pressure on bond markets. The yield on the U.S. 10-year Treasury note rose to 4.47%, as investors weighed the possibility that the Federal Reserve may need to raise interest rates again later this year to contain inflation.

Market participants are closely watching comments from Federal Reserve officials this week, along with key economic reports, including the Institute for Supply Management's manufacturing survey and the U.S. employment report for May.

Economists expect U.S. payrolls to increase by approximately 85,000 jobs, while the unemployment rate is projected to remain unchanged at 4.3%. Stronger-than-expected employment data could reinforce expectations that the Federal Reserve will maintain a more restrictive monetary policy.

The U.S. dollar remained broadly stable against major currencies. The Japanese yen and the euro continued to face pressure due to their economies' dependence on imported energy. The dollar traded at 159.42 yen, while the euro stood at $1.1645.

Meanwhile, gold prices were little changed at $4,535 per ounce, attracting limited demand from investors despite ongoing geopolitical and inflation concerns.

Source: Reuters