SYDNEY: Asian shares firmed on Monday as AI continued to drive demand, offsetting a lack of progress in Gulf peace talks that challenged optimism over the reopening of the Strait of Hormuz and boosted oil prices. While negotiators in Washington and Tehran are apparently working to strike a deal, President Donald Trump has been remarkably silent on their progress. Speaking on Saturday, Defense Secretary Pete Hegseth said the US was prepared to strike Iran again if no deal could be reached. Tensions in the region have not been helped by Israel’s push into Lebanon in the fight against the Iranian-backed Hezbollah terrorist group.

“While uncertainties remain, the critical risk phase for the global economy should be over if tankers can start moving again,” said Michael Ferroli, head of US economics at JPMorgan.

“Still, not everything will return to its pre-conflict status – oil prices are likely to remain elevated for some time, as inventories are rebuilt and supply infrastructure in the Middle East is repaired.”

Indeed, the lack of news sent Brent up 1.9% to $92.89 a barrel, while US crude gained 2.4% to $89.46.

Asian stock markets remain ⁠underpinned by demand for semiconductors and AI-related gear, with Japan’s Nikkei up nearly 5% last week to hit an all-time high, with a further 0.5%.

South Korea rose 1.3% after rising 8% last week, while Taiwan rose nearly 6% last week. MSCI’s broadest index of Asia-Pacific shares outside Japan added 0.2%.

Nvidia boss Jensen Huang kicked off the Computex trade show in Taiwan on Monday with a speech about AI in which he is expected to tout his company’s latest product efforts as well as the island’s central role in the industry.

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For Europe, EUROSTOXX 50 futures fell 0.3%, while DAX futures shed 0.2% and FTSE futures shed 0.5%.

S&P 500 futures rose 0.2%, while Nasdaq futures firmed 0.4% after setting a record last week.

Yet gains have been narrow with the top 10 AI-linked companies making up 40% of the S&P 500 and only 21 of the 500 stocks making record highs. Tech stocks rose nearly 16% in May, while consumer discretionary and healthcare managed a little more than 2%, and consumer staples lost more than 3%.

A pulse of oil inflation hampered bond markets as the US 10-year yield rose 3 basis points to 4.470%. Markets suggest a 50-50 chance the Federal Reserve will have to raise rates by the end of the year to prevent rising prices from dampening inflation expectations.

A host of Fed members are set to speak this week, while key data includes the ISM survey of manufacturing and the May payrolls report on Friday.

Market forecasts are for a solid increase in employment of 85,000, keeping the unemployment rate steady at 4.3%. Anything stronger will likely narrow down the possibilities for tourism.

The market’s hawkish outlook has kept the dollar broadly steady, with the Japanese yen and euro held back by the region’s reliance on energy imports.

The dollar was stronger against the yen at 159.42, but bulls were wary of risking a Japanese intervention on a break of the 160.00 barrier.

The euro was at $1.1645, having spent the last week between $1.1585 and $1.1661.

In commodity markets, gold was little changed at $4,535 an ounce, which found little support as a safe haven or hedge against inflation.