Asian Stocks Struggle for Direction as BOJ Holds Rates and Iran-Israel Conflict Escalates

Font: Financial Modeling Prep  • Jun 17, 2025

Asian stock markets remained subdued on Tuesday, as investors weighed a hawkish geopolitical turn in the Middle East and awaited further clarity on global monetary policy. While Japanese stocks gained after the Bank of Japan’s policy decision, regional markets largely ignored Wall Street’s overnight tech-led rebound.

U.S.-Iran Tensions Overshadow Risk Sentiment

The mood across Asian equities turned cautious after former U.S. President Donald Trump called for the evacuation of Tehran. The remarks escalated already high tensions in the region, raising fears of potential U.S. military involvement.

Although White House officials later clarified that the U.S. would not directly intervene, continued airstrikes between Israel and Iran fueled uncertainty as the conflict extended into a fifth day. These developments pushed S&P 500 Futures down by 0.4% in Asian trade, signaling risk aversion ahead of Wednesday’s Federal Reserve interest rate decision.

Japanese Markets Resilient After BOJ Decision

In contrast, Japan’s markets were upbeat. The Nikkei 225 rose 0.6%, while the TOPIX index gained 0.4%, bolstered by tech stock strength and yen weakness, which supported exporters.

The Bank of Japan kept interest rates steady at 0.5%, as anticipated, and said it would continue its government bond purchases through 2026. However, the BOJ revealed a slower pace of tapering starting April 2026, planning to reduce bond buying by 200 billion yen per quarter, compared to the current 400 billion yen pace.

The central bank’s forward guidance signaled an effort to maintain market liquidity and stability amid economic headwinds. Markets are now focused on a forthcoming address by BOJ Governor Kazuo Ueda, who may offer more clarity on inflation and monetary policy direction.

Looking Ahead

With rising geopolitical threats and an imminent Fed decision, global investors are expected to remain defensive. While Japan offered some relief, broader Asian markets appear locked in a wait-and-watch mode.

For investors tracking sectoral impacts, real-time data through the Sector Historical API and S&P 500 Futures trends could provide added insight as volatility builds.