How the AI boom is helping Asia weather the Iran war energy shock
The war in Iran might as well be over for investors as positive sentiment, strong corporate earnings and the AI boom lift Asian markets
For financial markets, the war in Iran and the energy shock that ensued might as well be over. Since March 30, the benchmark S&P 500 equity index has surged 12.5 per cent, exceeding the record high reached on January 27. Global shares have also bounced back sharply. The MSCI All-Country World Index ex US, a gauge of international stocks that excludes the United States, is less than 4 per cent below its all-time high on February 25.
Several factors are at play. Most investors evidently believe the worst of the war is over. Neither the US nor Iran has much appetite for resuming large-scale hostilities. Citadel Securities said the most likely outcome is a deal that is “less of a comprehensive agreement and more of a freezing arrangement designed to buy time, reduce immediate escalation risk and stabilise oil markets without resolving the underlying dispute”.
That the rally is particularly pronounced in parts of Asia – the region most exposed to the energy crisis given its heavy reliance on imports of oil, gas and refined petroleum products from the Middle East – shows the degree to which the war is no longer the chief determinant of sentiment.
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