Asian stocks rise, but trade below intraday highs

Nikkei 225 and TOPIX indexes gained 0.7% and 1.1%, respectively, after curbing a bulk of their earlier gains

Most Asian stocks rose on Tuesday, but traded well below intraday highs as investors parsed conflicting signals on de-escalation in the U.S.-Israel war on Iran.

Attacks between Iran, Israel, and surrounding Middle Eastern countries continued into the early hours of Tuesday, while oil prices rebounded as the war entered its fourth straight week.

Nikkei 225 and TOPIX indexes gained 0.7% and 1.1%, respectively, after curbing a bulk of their earlier gains.

Government data showed Japanese consumer price index inflation grew at its slowest pace in almost four years in February, while core inflation dropped below the Bank of Japan’s 2% annual target.

The CPI drop was largely driven by government subsidies on energy and food prices, with underlying Japanese inflation remaining strong.

Capital Economics analysts said the February print did little to shift the needle on interest rate hike expectations for the BOJ, especially with said government subsidies set to expire in April.

Broader Asian stocks advanced on Tuesday but curbed much of their initial gains amid conflicting signals on the Iran war. Markets were also nursing deep losses in recent weeks as markets fretted over the economic ramifications of the war.

KOSPI added 1.3% after rising as much as 4.5%. The index had briefly slid into negative territory earlier in the day, and was nursing a 6.5% loss from the prior session.

Investors were wary of a more hawkish Bank of Korea under new Governor Shin Hyun-song.

Shanghai Shenzhen CSI 300 and Shanghai Composite indexes rose 0.6% and 0.8%, respectively, while Hang Seng added 1.4%. All three had also briefly traded negative earlier in the day.

ASX 200 gained 0.5%, while Straits Times was flat. Futures for Nifty 50 index declined 1.4%.

Asian markets have broadly tumbled since the onset of the war in the Middle East, given that economies of several countries are highly dependent on oil and gas imports. Iran’s blockage of the Strait of Hormuz effectively cuts off around 20% of the world’s oil consumption.