Hong Kong stocks extend rebound on proposed oil reserve release - SCMP

Hong Kong stocks extended their rebound on Monday, driven by a sharp decline in crude oil prices following remarks from US President Donald Trump suggesting a potential resolution to the conflict with Iran. The Hang Seng Index rose 2.2% to 25,959.90, marking its largest single-day gain in two weeks, while the Hang Seng Tech Index surged 2.4%. Mainland Chinese markets also saw gains, with the CSI 300 Index rising 1.3% and the Shanghai Composite edging up 0.7%.

Brent crude oil fell to as low as $88.05 a barrel, down 11% from recent peaks, after Trump stated that US objectives in Iran were "pretty well complete" and hinted at an imminent end to hostilities. West Texas Intermediate (WTI) oil similarly dropped to $84.43. The retreat in oil prices alleviated concerns over stagflationary pressures, which had previously spurred a market selloff when oil crossed $100 a barrel earlier this month. Economists estimate that sustained crude prices above $100 could add 0.7 percentage points to global inflation while reducing growth by 0.4 percentage points.

Analysts noted that the rebound reflected relief over reduced geopolitical risks but cautioned that uncertainties remain. Kenny Ng Lai-yin of Everbright Securities International attributed the rally to "ample momentum" after recent declines, while Stephen Innes of SPI Asset Management highlighted oil's direct impact on corporate costs and inflation expectations according to market analysis. However, Morningstar's Lorraine Tan urged caution, citing unresolved details on reopening the Strait of Hormuz and potential escalations if Iran disrupts oil supplies as experts warned.

The market's sensitivity to oil underscores its role as a critical input for global economies, with fluctuations directly influencing risk asset valuations and investor sentiment.