The situation in the Middle East shows signs of easing, with Asian credit default swaps posting their largest drop in 11 months.

As signs indicate that the Middle East conflict may be nearing its end, the cost of purchasing insurance against default risk for Asian investment-grade bonds has seen its largest drop in 11 months. Traders say that the credit default swap (CDS) spreads for these bonds have decreased by at least 7 basis points, potentially leading to the largest single-day drop in Markit's related index since May. At the same time, traders note that the yield spread for high-rated Asian bonds has narrowed by at least 1 basis point, marking the first decline in four days. On March 31, US President Trump signed an executive order at the White House and told the media that the US may end its military actions against Iran within two to three weeks. Trump said, "We're getting out. I think probably two weeks. I guess maybe two to three. We'll be leaving." He stated that his only goal was for Iran not to have nuclear weapons, and that this goal has been achieved. He said that the US military is completing its final tasks, stating that it could be completed in two weeks, or maybe a few more days. Trump also mentioned that if an agreement is reached with Iran, the conflict may end sooner. However, even without an agreement, the US can end the conflict. He said, "I'm willing to sit down, but they don't want to come. And that's okay. And if they come, that's great." Meanwhile, Iranian President Pezheshayyan stated on March 31 that Iran has the "necessary willingness" to end the war, provided that the other side meets Iranian demands, especially by providing assurances of non-aggression. He reiterated that Iran has not sought tension and war at any stage, and has the "necessary willingness" to end the war. The rebound in the Asian credit markets on Wednesday follows a sell-off in March, caused by heightened risk sentiment due to the escalating Middle East situation. The Markit CDS index saw its largest monthly increase since August 2023, while the average yield spread for Asian bonds saw its largest expansion since April 2025. The increase in oil prices due to the Middle East situation has had a cost impact on businesses in Asian countries that heavily rely on energy imports, with deteriorating profit expectations directly affecting the pricing of bonds for these businesses. Investors are therefore rushing to purchase CDS as "insurance" for these Asian bonds. Rajeev de Mello, Global Macro Investment Portfolio Manager at Gama Asset Management, said, "It seems that all parties are interested in reducing the intensity of the conflict. Asian CDS is reflecting this moderation trend. Unless there is a new escalation in attacks and tough rhetoric, I believe this trend signals the normalization of the CDS market."