Global Markets Rally on US-Iran Peace Optimism and Soft Japan Inflation

Key Facts

In a move reflecting a positive shift in the global geopolitical landscape, equity markets extended a relief rally driven by optimism over a potential peace agreement between the United States and Iran. According to reports, these developments have bolstered investor confidence and reduced the risk premium associated with Middle Eastern tensions. Simultaneously, Japan’s inflation data for April came in softer than expected, reducing pressure on the Bank of Japan to tighten monetary policy, while crude oil prices continued to retreat amid improved risk appetite.

This rally comes at a critical juncture as investors closely monitor the monetary policy paths of major central banks. In comparison to regional peers, Japan’s GDP data showed an annualized growth of 2.1% (per market data on May 18, 2026), surpassing the 1.7% forecast. Meanwhile, other regional economies showed resilient performance; Thailand’s GDP grew by 2.8% year-on-year, beating the 2.2% estimate, which supports an optimistic outlook for Asian growth despite China's industrial production slowing to 4.1% against a 5.9% forecast.

Looking ahead, traders are awaiting the Reserve Bank of Australia (RBA) meeting minutes on May 19, 2026, which may provide further clues on interest rate trends in the Asia-Pacific region. Attention is also turning to Malaysia’s inflation data due the same day, with forecasts expecting the annual rate to hold steady at 1.9%. As geopolitical risks subside, the stability of energy prices remains a pivotal factor in determining the trajectory of global inflation throughout the current quarter.