Japan's Nikkei 225 topped 69,700 for the first time Monday, climbing 5% after the US and Iran agreed to end their war. The index hit an intraday high of 69,705 before settling at 69,234, adding roughly $465 billion in market value. The rally spilled into crypto, where total market cap rose close to 2% and Bitcoin pushed toward 66,000.
A deal that ignited markets
President Trump announced an agreement to halt the US naval blockade of Iran and reopen the Strait of Hormuz. The deal will be signed in Switzerland on Friday. Crude oil prices dropped sharply — West Texas Intermediate down about 4.6%, Brent off roughly 5% — while US equity futures pointed higher. Dow Jones futures gained 342 points (0.7%), the S&P 500 futures rose 0.9%, and Nasdaq 100 futures added 1.4%.
Asian benchmarks posted huge moves. South Korea's KOSPI surged 5.46%. Japan's broader Topix climbed 3.3%.
BOJ expected to raise rates to 1%
That's the good news. The Bank of Japan meets Tuesday, and expectations are sky-high: 49 of 51 economists surveyed by Bloomberg predict a hike to 1% from 0.75%, and market probability sits above 90%. A Reuters poll shows economists expect another hike to 1.25% in the fourth quarter.
This isn't just another central bank move. Japan has triggered four market selloffs since 2024, and the upcoming decision could be the fifth. Higher Japanese interest rates reduce the appeal of the yen-funded carry trade by increasing borrowing costs and narrowing yield advantages. Investors may start reducing leverage and repatriating capital, potentially weighing on global equities and risk assets — crypto included.
The carry trade unwind risk
Any signal from the BOJ that policymakers intend to tighten more aggressively than expected could accelerate the unwind of yen-funded positions. That would pressure stocks, cryptocurrencies, and other risk-sensitive assets. The timing isn't great: markets are still digesting the peace deal and its implications for oil, shipping, and geopolitics.
While Monday's rally was broad and enthusiastic, the BOJ decision Tuesday will test whether the optimism holds. If the central bank delivers the expected hike but sounds cautious about further moves, risk assets could breathe easy. If it hints at a faster pace, the party might not last the week.
All eyes are on Tokyo Tuesday morning.
