Asian markets traded mixed on Monday while oil prices climbed modestly after reports that the United States and Iran had agreed to halt further attacks following a weekend of military exchanges that tested their fragile truce.
Despite the development, investors remained cautious after a turbulent week dominated by Middle East tensions and growing concerns that the artificial intelligence-driven rally in technology stocks may be overheating.
Markets are betting that Washington and Tehran will eventually reach a broader agreement to end the conflict and fully reopen the Strait of Hormuz. However, negotiations remain delicate after days of military strikes between the longtime rivals.
The latest confrontation disrupted shipping through the strategic waterway and renewed fears that Iran could once again restrict traffic through one of the world’s busiest energy corridors.
The US Central Command said it struck 10 Iranian military targets in response to what it described as continued Iranian attacks on commercial shipping.
Iran responded by launching strikes against US military facilities in Kuwait and Bahrain, prompting both Gulf nations to condemn the attacks.
Tensions have also risen over Oman’s decision to establish an alternative shipping route along its coastline in coordination with the International Maritime Organization. Tehran insists it should retain authority over navigation through the Strait of Hormuz, a position it says has been undermined since the conflict began.
According to US media reports citing senior American officials, both countries have agreed to suspend further attacks and are expected to resume negotiations in Qatar on Tuesday.
US President Donald Trump reiterated that military action remains an option if Iran resumes attacks, warning over the weekend that the Islamic Republic “would no longer exist” if Washington is forced back into war.
Iran’s Foreign Minister also warned that any attempt by vessels to bypass Tehran’s preferred shipping route would only heighten regional tensions.
A US official said technical discussions on the memorandum of understanding would continue, adding that both sides had agreed to stand down for now while commercial shipping resumes through the strait.
Oil prices reacted positively to the easing tensions. US benchmark West Texas Intermediate crude rose more than one per cent, while Brent crude also posted gains after falling back to pre-war levels last week.
Stock markets, however, delivered a mixed performance. Hong Kong, Sydney, Wellington, Taipei and Manila recorded gains, while Tokyo, Seoul, Shanghai, Singapore and Jakarta finished lower.
Technology stocks remained under pressure after leading last week’s market losses. South Korean chipmakers SK hynix and Samsung were among the biggest decliners as investors questioned whether soaring AI-related valuations remain justified.
The sector has faced mounting scrutiny over the enormous capital being poured into artificial intelligence projects, with investors increasingly asking when those investments will begin generating meaningful returns.
The AI boom has helped propel markets in Seoul, Tokyo and on Wall Street to record highs this year. Shares of SK hynix alone have surged roughly 300 per cent during the first half of 2026.
Adding to investor concerns, the Bank for International Settlements warned that the AI investment boom could eventually end in a painful correction.
In its annual report, the institution cautioned that disappointing returns could trigger a sharp pullback in financing, turning today’s spending spree into a prolonged investment downturn with wider consequences for global financial markets.
The report also warned that a major correction in equity markets could have a far greater impact on the global economy than similar downturns experienced in previous years.
Investors are now awaiting this week’s US employment report, which could influence the Federal Reserve’s next interest rate decision.
The central bank has adopted a more hawkish tone in response to inflationary pressures linked to the Iran conflict.
IG market analyst Fabien Yip noted that stronger-than-expected jobs data last month triggered a four per cent sell-off in the Nasdaq, its biggest one-day decline in more than a year, as investors feared interest rates would remain elevated.
He said another strong employment report could spark a similar rotation out of technology stocks, while weaker data may ease rate hike expectations and provide fresh support for growth shares.
