Asian Markets Rise Amid Stabilization in Israel-Iran Conflict

Most Asian stocks rose on Monday as concerns over the Israel-Iran conflict were soothed by a less severe than feared attack by Israel, while Japanese shares rose amid increased political uncertainty.

Japanese Markets Outperform

Japanese markets were the best performers on Monday as the ruling Liberal Democratic Party (LDP) lost its parliamentary majority. Investors are betting that heightened political uncertainty will reduce the likelihood of more interest rate hikes by the Bank of Japan (BOJ).

Israel attacked Iran over the weekend but did not target Tehran’s oil and nuclear infrastructure, marking a less severe escalation in the long-running conflict. Most Asian markets responded positively, while oil prices fell.

Regional markets took mixed cues from Wall Street, with attention shifting to key technology earnings and economic readings due this week. U.S. stock index futures rose in Asian trade, fueled by optimism regarding developments in the Middle East.

Japanese Shares Rise as Political Uncertainty Reduces Rate Hike Bets

Japan’s Nikkei 225 and TOPIX indexes saw gains of 1.5% and 1.2%, respectively. Following the LDP's loss of its parliamentary majority, doubts arose regarding the country's political dynamics in the years ahead.

The LDP will need to seek alliances with smaller, regional parties, potentially creating a more fractured economic climate. Although this situation increases uncertainty for Japanese markets, it also lessens the BOJ's ability to raise interest rates further. The yen fell sharply, thereby benefiting export-oriented stocks.

The central bank is expected to maintain its current rates during its meeting later this week.

Broader Asian Markets Steady with Tech Earnings and Economic Data Ahead

Asian markets broadly drifted higher on Monday, focusing on upcoming key U.S. technology earnings and significant economic data. Five of Wall Street’s 'Magnificent Seven' tech firms are set to report this week, providing cues for broader equity markets.

Australia’s ASX 200 rose 0.1% in anticipation of key inflation data due later this week. South Korea’s KOSPI added 0.6%, with major technology stocks awaiting more cues related to the artificial intelligence sector.

Chinese markets were less active, with the Shanghai Shenzhen CSI 300 and Shanghai Composite indexes moving within a flat-to-low range. Purchasing Managers Index (PMI) data from China is expected this week, following several stimulus measures outlined by Beijing.

Hong Kong’s Hang Seng index remained steady.

Futures for India’s Nifty 50 index indicated a positive open, as local stocks could see some bargain buying after experiencing significant losses in October. More Indian earnings reports are also anticipated in the coming days.