File photo
Tokyo: Oil prices pared gains Monday after a spike following fresh threats in the war in the Middle East, while Tokyo and Seoul shares closed higher.
Many markets in Asia and Europe were closed for holidays on Easter Monday, which coincides with China's Qingming Festival.
Crude oil contracts had surged at the week's market opening after US President Donald Trump made an expletive-laced threat to destroy Iran's civilian infrastructure, demanding Tehran bow to his demands for a deal to reopen the Gulf to shipping.
But they fluctuated during the day, and by late afternoon US benchmark West Texas Intermediate had lost 0.7 percent at $110.75 a barrel, while North Sea Brent was up 0.2 percent to $109.20.
Analysts said a report by Axios that said the United States and Iran were discussing terms with regional mediators for a potential 45-day ceasefire had calmed sentiment among investors.
"Markets are beginning to flirt with the idea of a peace dividend," wrote Stephen Innes at SPI Asset Management.
However, it is "a tentative recalibration, a market shading probabilities rather than rewriting the script", Innes added.
Bloomberg Markets Live strategist Mark Cranfield said the reaction to the report "shows how keen investors are to see a de-escalation in the Iran war, which is dominating a risk aversion theme across markets".
"Should President Trump push back against ceasefire hopes when he speaks later on Monday, this positive mood will reverse," he added.
Tokyo closed 0.6 percent higher and Seoul ended the day with gains of 1.4 percent. Among other Asian markets open on Monday, Singapore was up 0.4 percent but Jakarta was down 0.5 percent.
MUFG's Lloyd Chan said in a note that "it remains to be seen whether this escalatory rhetoric ultimately proves to be another 'TACO' moment" -- a jokey acronym for "Trump always chickens out".
But "the persistence of threats to critical Iranian infrastructure keeps escalation risks elevated", he said.
The war, entering its sixth week since the US and Israel first attacked Iran on February 28, has engulfed the Middle East in conflict and upended the global economy.
