Oil Gains On Middle East Conflicts, HK Stocks Jump: Markets Wrap

Oil advanced after tensions in the Middle East flared up with Iran firing a barrage of missiles at Israel. Asian stocks gained, led by Hong Kong, as China’s stimulus measures continued to sway investors.

Crude extended gains while gold held near a record. Equities in Japan and South Korea declined following Tehran’s sharp but brief strike in reprisal for Israel’s attacks on Lebanon in recent days. The Israel Defense Forces said many of the missiles had been intercepted as Prime Minister Benjamin Netanyahu vowed to retaliate.

The broad risk-off mood came as geopolitical tensions ratcheted up in the Middle East and as traders await further clarity over Israel’s response. The flight to safety has sent oil, haven assets higher and stocks lower. Meanwhile, Chinese shares overcame cautious risk sentiment, extending a stimulus-induced rally as traders returned from a public holiday, driven by optimism about China’s economy and attractive valuations. 

“We have to bear in mind that Hong Kong and China have been underweight or underexposed for a while now so it won’t be that sensitive to short-term market events such as geopolitics,” said Billy Leung, an investment strategist at Global X Management in Sydney. The move also reflects two days of market action as traders came back from holiday, he said.

Markets in mainland China remain shut for Golden Week. The Taiwanese stock market is also closed as Super Typhoon Krathon approaches the island.

An index of Chinese stocks rose as much as 6.5%, the most since November 2022, as it headed for a 13th straight winning session. Chinese property stocks extended gains on Wednesday after Beijing followed other major cities in China in relaxing home purchase rules.

The Middle East conflict drove Wall Street’s fear gauge—the VIX—higher on Tuesday, touching a key level that usually indicates more market swings are in store. Australian and New Zealand government bonds rose, along with Asian defense and energy shares. 

“The market is on alert for headlines from the Israel-Iran conflict,” said Chris Weston, head of research at Pepperstone Group. “There are clearly enough reasons to hold back on taking risks.”

In corporate news, Samsung Electronics Co. is laying off workers as part of a plan to reduce global headcount by thousands of jobs.

Elsewhere, South Korea’s inflation slowed more than expected, supporting the case for a pivot to monetary easing by the central bank when it sets policy next week. Meanwhile, euro-area inflation slowed below the European Central Bank’s 2% target for the first time since 2021, prompting money markets to add to bets on another quarter-point decrease by the ECB this month.