Kospi up 2.6% as US-Iran talks ease oil fears

On Monday South Korea’s Kospi climbed 2.6% as reports of progress in talks between the United States and Iran reduced immediate oil supply concerns and pushed Asian equity benchmarks higher. Brent crude retreated toward $80 a barrel.

Iranian negotiators reported that a first round of diplomacy with U.S. officials made progress. Mediators from Qatar and Pakistan outlined a 60-day pathway toward a final agreement. The developments lowered the risk premium that had driven oil prices higher after recent threats and Tehran’s temporary restrictions on traffic through the Strait of Hormuz.

Equities across the region advanced. Japan’s Nikkei rose 1.9%, extending a rally that has lifted the benchmark to record levels. The MSCI Asia-Pacific index excluding Japan gained about 1%. Chinese blue chips moved without a clear direction. Heavy buying of semiconductor stocks helped lift the Kospi as investors targeted companies linked to AI infrastructure demand.

Oil prices eased from May’s spike above $126. Brent traded near $80 a barrel and U.S. crude held around $77.50. Shipping flows through the Strait of Hormuz remained thinner than normal, which kept traders cautious despite the diplomatic progress.

Futures on Wall Street showed limited follow-through. S&P 500 contracts fell about 0.2% and Nasdaq futures lost around 0.3%. European futures were mixed, with the Euro Stoxx 50 marginally lower and the FTSE posting a small gain.

Expectations for U.S. monetary policy weighed on sentiment. After last week’s Federal Reserve meeting, markets priced a higher chance of a rate increase by September and futures implied roughly 38 basis points of additional tightening by year-end. Two-year Treasury yields briefly touched 4.2276%, their highest level since early 2025.

The Fed’s preferred core inflation gauge is due this week and is forecast to edge higher for May. JPMorgan strategists noted the central bank can remain patient but warned the margin for further inflation surprises is narrowing; they expect support for quality growth and large-cap technology stocks.

Currency moves reflected higher U.S. yields. The dollar traded near 161.5 yen, a level that may draw attention from Japanese authorities. The euro hovered around $1.146 after a recent three-month low. Sterling softened amid renewed U.K. political uncertainty, with analysts warning that questions over the prime minister’s position could keep gilt markets under pressure.

Diplomatic signals reduced an immediate oil shock, while thinner shipping through Hormuz, elevated U.S. yields and upcoming inflation data kept investors cautious at the start of the week.