Asian markets struggled for direction on Thursday, while the U.S. dollar remained firm, as investors adopted a cautious stance amid rapidly evolving developments in the Middle East. Iran signalled it would consider a U.S. proposal aimed at ending the ongoing Gulf conflict, offering a potential—yet uncertain—path toward de-escalation.
The widening conflict has unsettled global markets, driving oil prices sharply higher, reigniting inflation concerns, and disrupting expectations around interest rate movements.
Trading in Asia reflected mixed sentiment. Japan’s Nikkei index edged up 0.6%, while South Korean equities declined 1.2%. Meanwhile, MSCI’s broad Asia-Pacific index excluding Japan slipped 0.23%, putting it on track for an 8.7% monthly drop—its steepest decline since October 2022.
The U.S. dollar remained near recent highs and is set for a 2% monthly gain, reinforcing its position as a preferred safe-haven asset during periods of geopolitical uncertainty.
Recent signals from Iran indicated a possible willingness to engage in negotiations, provided its conditions are met. The U.S. has reportedly presented a 15-point ceasefire proposal, though initial reactions from Tehran were cautious.
Market analysts note that while the tone of developments appears somewhat constructive, uncertainty remains high. Investors continue to grapple with conflicting signals, suggesting expectations of further volatility even as the likelihood of a negotiated outcome gradually improves.
The nearly month-long conflict—triggered by joint U.S.–Israeli strikes on Iran in late February—has severely disrupted global energy flows. The closure of the Strait of Hormuz, a critical route for roughly one-fifth of global oil and liquefied natural gas shipments, has intensified supply concerns.
As a result, oil prices have surged above $100 per barrel, with Brent crude trading at around $103.35, marking a 1% daily increase and a sharp 42% gain over the month.
Analysts caution that reaching a resolution may prove complex, given the differing strategic objectives of the U.S., Israel, and Iran, suggesting that markets could remain volatile in the near term.
Asian Development Bank approves additional US$100 million support for Sri Lanka amid global headwinds
The Asian Development Bank (ADB) President Masato Kanda met with Sri Lankan President Anura Kumara Dissanayake and announced that the bank is prepared to extend an additional US$100 million in budget support to help Sri Lanka navigate the economic and financial impacts arising from the ongoing conflict in the Middle East.
Sri Lanka is the first ADB member country to formally request such assistance. With this allocation, ADB’s total planned budget support for Sri Lanka in 2026 rises to US$480 million.
President Kanda noted that Sri Lanka is at a pivotal stage, transitioning from crisis recovery toward sustained growth and improved economic resilience. However, he cautioned that external pressures—including rising oil prices, supply chain disruptions, and weakening remittance inflows linked to the Middle East conflict—continue to weigh on the economy. He added that the additional support will help cushion these shocks and safeguard macroeconomic stability.
During his visit, Kanda also travelled to the Kegalle District to assess damage caused by Cyclone Ditwah. In response, ADB is fast-tracking a US$200 million Emergency Assistance Loan aimed at restoring critical transport infrastructure and irrigation systems while supporting affected communities and livelihoods.
He further visited the Colombo Port, where he reviewed ADB-funded infrastructure projects such as the Colombo Port Expansion and the Port Access Elevated Highway. He emphasized that strengthening port capacity and logistics efficiency will be essential to enhancing Sri Lanka’s role in regional and global trade networks.
Looking ahead, ADB plans to scale its annual assistance programme to over US$1 billion, focusing on structural reforms, resilient infrastructure, and human capital development. During discussions with private sector CEOs, Kanda highlighted the importance of mobilising private capital, noting that public funding alone is insufficient to meet Sri Lanka’s investment needs. He stressed the need to develop bankable projects and expand risk-sharing mechanisms to support a more competitive, export-driven economy.
Global stocks remain cautious as Middle East ceasefire talks take focus
