Asian equity markets retreated on Monday as optimism surrounding a potential US-Iran peace agreement evaporated, triggering a sharp reversal in energy and bond markets.
The shift in sentiment sent oil prices higher and pushed bond yields up, reflecting renewed concerns about geopolitical risk and the potential for sustained higher US interest rates.
The market move marks a stark contrast to the previous session, when Asian stocks rallied and oil prices fell sharply following initial reports of a diplomatic breakthrough aimed at ending nearly four months of conflict.
That brief risk-on episode has now been priced out as doubts about the durability of the peace process have returned, leading investors to reassess the supply risk premium embedded in energy markets.
Brent crude and other energy benchmarks climbed as traders repriced the probability of a lasting ceasefire, while equity indices across the region slipped on the back of rising yields.
The volatility underscores how quickly market positioning can shift when geopolitical narratives change, with energy markets remaining highly sensitive to developments in the Middle East.