By Ronnie Harui


Asian equity markets declined as a renewed ceasefire between Israel and Lebanon showed signs of strain, sapping investor appetite for riskier assets.

The ceasefire came under pressure within hours of its agreement, as Israeli forces and Hezbollah militants exchanged fire on Thursday. Both sides cast doubt on the extent of their participation in the agreement. The deal, worked out this week, is contingent on Hezbollah stopping attacks on Israeli forces and withdrawing fighters from southern Lebanon, the U.S. State Department said.

Israel said it would continue its offensive in southern Lebanon, while Hezbollah rejected key elements of the fragile ceasefire proposal. The fighting between Israel and Hezbollah in Lebanon has become a major sticking point in the U.S.-Iran peace talks. Tehran views the Lebanon conflict as a violation of the existing ceasefire between the two nations, which could threaten to derail the broader negotiations.

"The ceasefire between Israel and Lebanon appears to be on shaky ground," ANZ Research analysts wrote, noting Hezbollah's refusal to abide by the conditions of the ceasefire announced by the State Department.

The slump in technology stocks on Wall Street overnight also weighed on Asian equities. Japan's Nikkei Stock Average was down 1.3% in Friday afternoon trading, and South Korea's Kospi slid 5.0%. U.S. stock futures were also tracking lower, with the eMini Nasdaq 100 futures falling 1.0%, the eMini S&P 500 futures shedding 0.5%, and the eMini Dow futures down 0.1%.

The "U.S.-Iran war peace talks continued to show little progress as Hezbollah rejected the U.S. State Department ceasefire conditions while [President] Trump claims they are in the 'final' stages of ceasefire talks," Maybank analysts said in a note.

Crude oil prices rose. Front-month West Texas Intermediate crude futures edged 0.1% higher to $93.11 a barrel and front-month Brent crude futures climbed 0.4% to $95.40 a barrel, according to ICE data.

In currency markets, the dollar hovered near the psychologically important 160 yen level, widely perceived as a threshold for potential intervention by Japanese authorities. The dollar was recently little changed at 159.94 yen, LSEG data showed.

With the Japanese currency facing renewed selling pressure amid continuing Middle East tensions, Japan aims to defend the yen's credibility by strengthening its economy, Prime Minister Sanae Takaichi said.

Takaichi said her policies seek to increase domestic investment, reinforce Japan's supply chains and boost growth potential.

"I believe that enhancing the international competitiveness of the Japanese economy through these initiatives will help maintain confidence in the yen," the prime minister told Parliament on Friday.


Write to Ronnie Harui at ronnie.harui@wsj.com


(END) Dow Jones Newswires

06-05-26 0206ET