By Ankur Banerjee
SINGAPORE, July 21 (Reuters) – Asian stocks snapped a three-day losing streak on Tuesday as oil prices retreated from a one-month high on mediation efforts in the Middle East, and investors braced for corporate earnings that will test an under-pressure AI trade.
Yemen’s Iran-aligned Houthis said they would impose a naval blockade on Saudi Arabia, a move that could further disrupt energy supplies, amid increased attacks between the U.S. and Iran, even as efforts were being made to revive a fragile ceasefire.
A senior Iranian official told Reuters on Monday that Tehran had received a proposal from mediators for a 10-day ceasefire, intended to pave the way for a lasting agreement to end the war that began on February 28 with U.S.-Israeli attacks on Iran.
Brent crude futures eased 0.74% to $88.56 per barrel on Tuesday as investors latched on to hopes of a resolution. Brent hit a one-month high of $91.42 a barrel in the previous session. [O/R]
“I think we’ve got a really strange situation that investors are still trying to look at things with a glass half full view, as we’ve seen this all before a few months ago and want the same outcome,” said Nick Twidale, chief market strategist at ATFX Global in Sydney.
Twidale said concern that things could get out of hand and the conflict escalate across the region had to be growing. “Feel we might see one catalyst that pops things and then we are off to the races,” he said.
In stocks, MSCI’s broadest index of Asia-Pacific shares outside Japan was up more than 2% after dropping for three straight sessions. Japan’s Nikkei gained nearly 3% while South Korea’s KOSPI rose 4.5%.
“This looks more like a relief rally than an all-clear signal,” said Charu Chanana, chief investment strategist at Saxo. “The rebound can continue if oil stays contained and tech earnings validate AI spending, but both assumptions remain fragile.”
U.S. stock futures rose sharply while European futures were down 0.2%, indicating a muted open.
Global stocks, led by chipmakers, have been hit by severe volatility in recent weeks as investors fret about high valuations, profit growth and whether the investment in AI infrastructure will yield tangible results.
AI’S EARNINGS TEST
Investor focus this week will be on earnings from companies including Alphabet and Intel to gauge the impact of the war and whether the AI trade has more room to run given sky-high profit expectations for the second quarter.
Strong earnings from Asian chip bellwethers Samsung Electronics and TSMC in recent weeks were not enough to satisfy investor expectations, underscoring the challenge facing the industry.
“While demand for AI hardware remains red-hot, with companies barely able to keep up supply, investor expectations for earnings have become increasingly lofty, rendering the sector vulnerable even to a marginal adjustment in projections,” said Fred Neumann, chief Asia economist at HSBC in Hong Kong.
“The economic backdrop is becoming more challenging as well, with rising energy prices and higher interest rates complicating the outlook and showing that even the AI hardware sector is not entirely immune to such broader developments,” Neumann said.
Escalating U.S.-Iran tensions have revived inflationary worries and pushed Treasury yields higher. The 2-year note yield, which typically moves in step with Federal Reserve interest-rate expectations, was at 4.206% in Asian hours after gaining 4 basis points on Monday.
Traders are pricing in 33 basis points of interest rate increases this year.
The dollar was steady against most major currencies supported by safe-haven flows. The euro last bought $1.14145, while the Japanese yen was at 162.51 per dollar, keeping traders on alert for intervention from Tokyo.
Sterling was nursing losses after comments from Andy Burnham, Britain’s seventh prime minister in a decade, spooked investors over his fiscal policy. It was last at $1.344.
Burnham said he would stick to the previous government’s fiscal rules though he would use any flexibility within them.
(Reporting by Ankur Banerjee in Singapore; Editing by Jacqueline Wong and Kate Mayberry)
By Ankur Banerjee | Reuters | © Copyright Thomson Reuters 2026.
