Asian stocks headed for weekly gain, oil below $100

MSCI’s broadest index of Asia-Pacific shares outside Japan was down 0.8%

Asian stocks headed for a second week of strong gains while oil prices were pinned below $100 a barrel with investors dialling ​back risk ahead of a crucial weekend that could pave the way for a near-term resolution to the Middle East war.

Investors have been quick to take an optimistic view on any signs of denouement this month, even though the Strait of Hormuz – through which a fifth of the ​world’s oil and gas supply typically flows – remains closed.

That has kept oil prices below $100 per barrel though they remain well above the pre-war ​levels. Brent crude futures declined more than 1% to $98.14 a barrel.

In stocks, MSCI’s broadest index of Asia-Pacific shares outside Japan was down 0.8% as investors locked in profits after a blistering rally this month.

The index remains ​close to its highest since March 2, the first trading day after the Iran war broke out, and is up 14.5% in April after declining 13.5% last ​month.

Nikkei slid 1% after hitting a record high on Thursday. Almost all stock markets are back to levels before the war erupted at the end of February.

For Andrew Chorlton, CIO for public fixed income at M&G, the last two weeks have been surprising in how quickly markets have been willing to look through the conflict and energy shock.

There’s quite a ​strong contrast between what policymakers and central bankers are saying about the risks that this conflict is creating versus what the market is implying, he said.

That seems ​somewhat complacent, Chorlton added. It seems unlikely that there shouldn’t be some additional risk premium priced in, either to growth or to inflation.