By Stella Qiu

(Reuters) - Asian shares reversed course and fell on Friday as investors took ​some money off the table from record rallies in Japan and South Korea, while signs of an early snag in U.S.-Iran talks ‌helped oil prices bounce and lifted the dollar.

European bourses are set for a lower open, with pan-region stock futures down 0.6%. The Nasdaq futures slid 0.9% after U.S. Vice President JD Vance pulled out of a planned trip to meet Iranian negotiators in Switzerland on Friday. The Swiss Foreign Ministry confirmed talks that had been planned for the day will not take place.

The ​Israeli military said it carried out strikes overnight and continued attacking what it described as Hezbollah militants and infrastructure in several areas in southern Lebanon.

Oil ​prices erased earlier losses. U.S. West Texas Intermediate crude rose 0.8% to $77.23 a barrel, but was still set for weekly declines after ⁠U.S. and Iran signed a peace deal to halt fighting and reopen the Strait of Hormuz.

Stocks in Asia turned down after rallying earlier, with Japan's Nikkei (.N225) down 0.6%, having hit a new record high for the fifth straight session in morning trade. That helped trim its weekly rise to 7%.

South Korea (.KS11) also dropped ​1.8% but is still set for a weekly gain of 9.5%.

Mainland China and Hong Kong's stock markets are closed for the Dragon Boat Festival holiday. Taiwan was also on holiday.

In the Middle East, oil tankers have started sailing through the Strait of Hormuz after the United States lifted its blockade on Iran on Thursday.

"We concede that there will be a number of ships ​eager to leave the Gulf’s warm waters, and we think crude will struggle to find its footing amid a flurry of 'open for business' headlines, and yet we ​question the durability of the deal," said analysts at RBC Capital Markets in a note to clients.

"In the event that the deal holds... the Hormuz reopening trajectory could resemble something ‌similar to ⁠the Red Sea, where shipping traffic remains over 50% below pre-crisis levels despite the Houthis signing a deal in May 2025 to end hostilities."

DOLLAR STRENGTH

The U.S. dollar surged to a new 13-month high on its major peers, as a hawkish shift from the Federal Reserve and a firm pledge from new Chair Kevin Warsh to deliver price stability led markets to price in more than one rate hike this year. Nine of 19 officials signalled higher borrowing costs this year when the central ​bank held rates steady as expected on ​Wednesday.

The U.S. dollar index is up ⁠1.3% for the week at 101.07. That pushed the yen to 161.4 a dollar , the lowest since July 2024 and well beyond the 160 level widely seen as a line in the sand for Japanese intervention.

The British pound was off ​0.3% at $1.3168, after a 0.7% drop overnight as the Bank of England kept interest rates on hold in a 7-2 vote. ​Greater Manchester mayor Andy ⁠Burnham won an election in the north of England on Friday, removing a key obstacle to a leadership challenge against Prime Minister Keir Starmer.

The hawkish turn at the Fed hit the short-term Treasuries hard, with two-year U.S. Treasury yields up 9 basis points this week to 4.1790%, but helped longer-dated bonds as investors were relieved by the drop in ⁠oil prices ​and a central bank unmoved by political pressure to cut rates.

Ten-year yields were down 3 bps ​to 4.4510% this week, while 30-year yields slumped 7 bps to 4.9010%, about the lowest in two months.

The cash Treasuries market is closed in Asia due to the Juneteenth holiday in the U.S.

Precious ​metals were under pressure due to a strong dollar. Spot gold lost 1.9% to $4,129 an ounce, while spot silver also fell 3.6% to $63.4 an ounce.

Reuters report

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