Asian stocks extend rally as oil steadies on reserve release hopes

Asian stock markets continued to rise on Wednesday while oil prices stabilised after reports that the International Energy Agency (IEA) may release a record amount of emergency reserves to ease soaring energy prices.

Energy markets have experienced extreme volatility since the United States and Israel launched strikes on Iran at the end of last month. Iran responded by targeting sites across the oil-rich Gulf region and effectively shutting down the Strait of Hormuz, a key route for global oil shipments.

Concerns that the conflict could drag on and disrupt global energy supplies pushed oil prices sharply higher earlier this week. On Monday, both major crude benchmarks surged close to $120 a barrel, their highest levels since 2022, while natural gas prices also spiked.

However, oil prices dropped sharply on Tuesday after US President Donald Trump said the war with Iran was likely to end soon. Markets were also encouraged by news that Group of Seven nations were discussing the possible release of strategic oil reserves to stabilise supplies.

Investor sentiment improved further after a Wall Street Journal report said the IEA was considering a reserve release larger than the 182 million barrels that member countries released following Russia’s invasion of Ukraine in 2022.

According to the report, the proposal was discussed during an emergency meeting of energy officials from the IEA’s 32 member countries on Tuesday, with a decision expected on Wednesday.

Although Brent and West Texas Intermediate crude prices initially fell about five percent on Wednesday, they later recovered part of those losses as uncertainty over the Middle East conflict remained.

Equity markets across Asia moved higher, with Tokyo and Seoul leading the gains after experiencing some of the biggest swings since the crisis began. Markets in Hong Kong, Sydney, Wellington, Taipei, Manila and Jakarta also advanced, while Shanghai and Singapore recorded slight declines.

French Finance Minister Roland Lescure said on Monday that G7 countries were still discussing options and had not yet reached the stage of releasing strategic reserves.

Market analysts say the main concern remains the stability of energy flows from the Middle East.

Fawad Razaqzada of Forex.com said the key issue for investors is whether energy shipments in the region can return to normal. He noted that the Strait of Hormuz remains the most critical point for global energy markets because a large share of the world’s oil passes through the narrow waterway.

Any disruption to traffic through the strait could quickly reignite fears of supply shortages and push oil prices sharply higher again, he said.

A spokesperson for the US Department of Energy said authorities are closely monitoring the situation and consulting with industry leaders while the US military prepares options to ensure the Strait of Hormuz remains open. One option being considered includes naval escorts for oil tankers moving through the region.

Iran has warned that it could block oil exports from the Gulf in response to ongoing strikes, saying it would determine when the war ends.

Trump responded by warning Tehran against placing mines in the Strait of Hormuz, through which nearly 20 percent of the world’s crude oil supply usually passes.

In a social media post on Tuesday, he said that if mines were placed in the waterway and not removed quickly, Iran would face severe military consequences.

Despite Trump’s suggestion that the conflict could end soon, analysts say there are signs of disagreement between the United States and Israel over how the war might conclude.

Skye Masters of National Australia Bank said statements from US and Israeli leaders indicate differing views about the endgame, noting that while Trump suggested the conflict may soon end, Israeli Prime Minister Benjamin Netanyahu has not shown readiness to de-escalate.

In early trading around 0230 GMT, West Texas Intermediate crude rose 0.4 percent to $83.75 per barrel, while Brent crude gained 0.6 percent to $88.28.

Among major stock markets in the region, South Korea’s Kospi climbed 3.3 percent and Japan’s Nikkei 225 rose 2.1 percent. Hong Kong’s Hang Seng Index added 0.4 percent, while Shanghai’s Composite Index slipped 0.1 percent.

In currency markets, the euro strengthened slightly to $1.1625, the pound rose to $1.3442, and the dollar edged up to 158.31 yen.

In the United States, the Dow Jones Industrial Average closed 0.1 percent lower, while London’s FTSE 100 ended the day up 1.6 percent.