Asian Stocks Stall as Oil Risk Grows: Is the Rally Over?

Asian stocks drifted sideways on Monday as investors weighed a renewed climb in oil prices against a global equity rally that hit fresh records just last week.

The lack of progress in ending the Iran war has kept crude elevated, raising the question of whether the recent bounce in Asian equity markets can hold.

A Rally Built on Rate-Cut Hopes

Japan's Nikkei edged 0.4% higher in early morning trading Monday, but soon fell back to its Friday close. Meanwhile the MSCI Asia-Pacific index excluding Japan was flat and Australia's resources-heavy shares slipped 0.3%. South Korea's markets were closed for a public holiday.

The broader rally, which lifted the S&P 500 to a record high last week, has been driven by fading expectations that the Federal Reserve will hike rates next month, now priced at a 69% probability of holding steady after soft US retail sales and consumer sentiment data. S&P 500 futures added 0.1% Monday, and Nasdaq futures gained 0.2%.

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