Asian stock markets advanced on Monday after oil prices dropped sharply, as the United States and Iran refrained from further military strikes while discussions continued over a possible return to negotiations on an interim ceasefire agreement.

Markets Rebound as Oil Prices Slide

Investor sentiment improved after Brent crude, the international benchmark, fell 4.6% to $87.46 per barrel, while U.S. West Texas Intermediate (WTI) crude dropped 5.1% to $84.79 per barrel.

The decline followed a second consecutive day without direct military exchanges between Washington and Tehran after nearly two weeks of escalating conflict linked to tensions in the Strait of Hormuz.

The Pentagon did not comment on the pause in military operations.

Asian Markets Close Higher

Most major Asian stock markets posted gains.

Japan's Nikkei 225 rose 0.2%, South Korea's Kospi gained 0.3%, Hong Kong's Hang Seng Index advanced 0.8%, and China's Shanghai Composite Index climbed 0.4%.

Australia's S&P/ASX 200 led regional gains with a 1.3% increase, while India's Sensex added 0.7%. Taiwan's Taiex was the only major regional index to decline, slipping 0.3%.

Shares of Chinese memory chipmaker CXMT surged about 470% in their debut on Shanghai's technology board.

The rally made the company China's most valuable listed firm, with an estimated market capitalization of 3.3 trillion yuan (approximately $490 billion).

U.S. markets closed mixed on Friday.

The S&P 500 edged up by less than 0.1%, while the Dow Jones Industrial Average gained 0.5%. The Nasdaq Composite fell 0.6%, weighed down by losses in major technology companies.

Micron Technology dropped 7%, while Broadcom declined 2.7%, contributing to the Nasdaq's weaker performance.

Inflation and Interest Rate Outlook Remain in Focus

Investors remain focused on inflation ahead of this week's U.S. Federal Reserve meeting.

Higher energy prices and new tariffs announced by President Donald Trump's administration have renewed concerns about rising inflation, reducing expectations for any near-term interest rate cuts. Instead, markets increasingly anticipate the possibility of another rate hike.

U.S. gasoline prices currently average $4.11 per gallon, according to AAA, lower than earlier this year but nearly $1 higher than the same period last year.

AI Spending Faces Investor Scrutiny

Corporate earnings are also drawing attention to whether heavy investment in artificial intelligence will continue generating strong returns.

Technology giants including Alphabet and Nvidia have invested billions of dollars to expand AI infrastructure, but investors are increasingly questioning whether future profits will justify the companies' high market valuations.