Asian markets opened with gains on Tuesday after reports indicated Iran could participate in peace talks with the United States in Pakistan, lifting investor sentiment and supporting renewed bets on artificial intelligence-related names. The move came as market participants also focused on a high-profile Senate confirmation hearing for Kevin Warsh, U.S. President Donald Trump
MSCI's broadest index of Asia-Pacific shares outside Japan climbed 0.9% in early trade. South Korea's Kospi advanced 2.1% and reached a fresh record high - a notable milestone given the regional backdrop since the Iran war began. Japan's Nikkei 225 added 1.2%, while Australian equities bucked the broader improvement, slipping 0.3%.
In U.S.-linked markets, S&P 500 e-mini futures were up 0.1%, while Brent crude eased 0.4% to $95.09 a barrel.
The underlying geopolitical picture remained tense. An uneasy ceasefire between the United States and Iran had been strained after U.S. authorities announced the seizure of an Iranian cargo ship, prompting vows of retaliation from Tehran. Iran initially said it would skip a second round of negotiations, though a senior official subsequently indicated the country might still dispatch delegates to the talks expected in Islamabad.
Adding to the confusion over diplomacy, a separate source said Vice President JD Vance remained in the United States on Monday, disputing reports that he was already traveling to Pakistan for the discussions.
These developments helped rekindle pressure on energy markets as shipping through the Strait of Hormuz stayed largely paralyzed, contributing to an overnight surge in oil prices before Brent's modest slip on Tuesday.
"While potential talks in Islamabad remain likely, rhetoric from Washington and Tehran continued to point to fragile and strained negotiations," analysts at Westpac wrote in a research note, highlighting the uncertain diplomatic tone that is keeping energy and risk markets on edge.
U.S. equities reflected the same underlying unease overnight. The S&P 500 closed down 0.2% amid doubts about whether the U.S.-Iran ceasefire would hold. The Nasdaq Composite ended a 13-day winning streak - the longest such run in more than three decades.
Attention in Washington was also fixed on Kevin Warsh, President Trump's nominee to lead the Federal Reserve, whose Senate confirmation hearing is due to begin at 10 a.m. EDT (1400 GMT) on Tuesday. Questions around his independence from the White House were expected to feature prominently during the proceedings.
In prepared remarks, Warsh said he is "committed to ensuring that the conduct of monetary policy remains strictly independent." Economists noted his stance on the Fed's balance sheet and quantitative easing could be especially consequential.
"In the past, Warsh was a vocal critic of the Fed's 'bloated' balance sheet, as he called it, and argued that it creates a distortionary impact on asset prices," observed Bansi Madhavani, senior economist at ANZ in London. She added that his preference for a smaller balance sheet is evident, and any further guidance on what he considers the optimal size would be closely watched.
Currency markets were relatively steady. The U.S. dollar index, which tracks the greenback against six major currencies, held at 98.08, in the midrange it has occupied over the past week. The euro traded at $1.1782 and sterling at $1.35225, both marginally lower on the day. The Australian dollar, a risk-sensitive currency, eased 0.1% to $0.7171 in early trading.
Fixed income movers were modest. The yield on the U.S. 10-year Treasury rose 0.8 basis point to 4.256%.
Precious metals and digital assets showed limited movement. Gold ticked up 0.1% to $4,824.83 after roughly a month of sideways trading. Cryptocurrencies remained within the narrow trading ranges they have occupied since early February, with bitcoin down 0.3% at $76,072.61 and ether slipping 0.8% to $2,320.92.
Market context note: Investors were balancing hopes for diplomacy with caution over how fragile negotiations may be, while monetary policy direction and energy market disruptions continued to shape risk appetite.