US-Iran Clashes Drive Asian Stocks Lower; Yen Strengthens

Renewed exchanges of fire between the United States and Iran on Thursday pushed investors into safer assets across Asia. The MSCI Asia-Pacific ex-Japan index fell 1.5%, Japan’s Nikkei 225 declined 1.9% and South Korean shares, reopening after a holiday, dropped as much as 2.6%. S&P 500 e-mini futures slipped about 0.5% after the S&P 500 fell 0.7% in the prior session.

Markets moved away from risk even as the US ISM services index for May came in stronger than expected, with firms reporting higher orders and rebuilding inventories. Analysts at Westpac wrote, “Financial markets shifted back into a risk-off mode as the US and Iran exchanged fire again.”

Oil eased after Israel and Lebanon agreed to implement a ceasefire. Brent crude futures fell about 1.3% to roughly $96.60 a barrel as traders assessed whether the truce, which requires a full halt to fire by Hezbollah and the withdrawal of its operatives from the South Litani Sector, would hold.

Currency markets reflected demand for safer assets. The yen strengthened 0.1% to 159.88 per dollar, moving away from the 160 level that traders view as a possible trigger for Japanese intervention. Bank of Japan Governor Kazuo Ueda warned the central bank must weigh the costs and benefits of raising interest rates if inflation risks outweigh downside risks to the economy. The Australian dollar rose 0.1% after data showed Australia’s April trade balance returned to surplus, helped by higher resource exports.

The US dollar index held near 99.44 after a three-day advance. The 10-year US Treasury yield fell about 1.4 basis points to 4.473%. Gold gained about 0.9% as investors sought traditional havens.

In Washington, the Republican-led House approved a war powers resolution intended to restrict President Donald Trump’s ability to continue the conflict with Iran. The measure must still pass the Senate and would require two-thirds majorities in both chambers to overcome a presidential veto.

In company news, Broadcom shares tumbled more than 13% in after-hours trading after the chipmaker missed quarterly revenue expectations and left its previous 2027 sales target unchanged.

Investors are watching the yen’s approach to 160 per dollar, central bank policy signals and whether oil’s recent decline continues if regional tensions change.