Asian Markets Cautious Amid Lunar New Year Closures as Oil Prices Rise on U.S.-Iran Talks

Asian financial markets moved cautiously on Tuesday in thin Lunar New Year trading, while oil prices climbed ahead of renewed U.S.-Iran nuclear negotiations in Geneva. Several major regional exchanges, including mainland China, Hong Kong, Singapore, Taiwan, and South Korea, remained closed for the holiday. U.S. markets were also shut on Monday for Presidents’ Day, contributing to lighter global trading volumes.

Japan’s Nikkei index slipped 0.5%, while the broader Topix fell 0.2% to 3,779.29. In contrast, Australia’s S&P/ASX 200 gained nearly 0.5%. U.S. stock futures were mixed in early Asian trading, with Nasdaq futures edging down 0.1% and S&P 500 futures up 0.2%.

Bond markets reflected a cautious tone. The benchmark 10-year U.S. Treasury yield dipped 1 basis point to 4.044%, its lowest level since early December. Japan’s five-year government bond yield declined 2 basis points to 1.65%, the lowest since February 2. Meanwhile, the U.S. dollar index held steady at 97.07 after a modest overnight gain. The Japanese yen strengthened 0.15% to 153.28 per dollar.

Japan’s weaker-than-expected fourth-quarter GDP weighed on sentiment. The economy expanded at an annualized pace of just 0.2%, well below forecasts of 1.6%, largely due to reduced government spending. Analysts suggest the disappointing data may increase pressure on Prime Minister Sanae Takaichi to pursue additional fiscal stimulus, including potential sales tax reductions. Market pricing indicates limited expectations for a Bank of Japan rate hike in March, with most economists projecting policy tightening later in July.

Oil markets gained momentum as investors monitored geopolitical risks. U.S. West Texas Intermediate crude rose 1.29%, while Brent crude increased 1.33%. Tensions remain elevated after Iran’s Revolutionary Guards conducted drills in the Strait of Hormuz, a key route for roughly 20% of global oil shipments. Traders are closely watching developments in U.S.-Iran talks and Ukraine negotiations, as any easing of tensions could reduce the geopolitical risk premium in oil prices.

Precious metals retreated, with gold falling 0.85% to $4,949.5 per ounce and silver down 2%, pressured by a firmer U.S. dollar.