Oil Prices Ease Amid US-Iran Tensions; Asian Markets Show Mixed Trading
Global markets opened amid heightened tensions between the US and Iran following a broad US military strike on Revolutionary Guard targets in southern Iran overnight. This escalation came after Iranian missile launches toward Jordan and direct threats from President Trump, raising market alertness. Reports suggest Trump is considering extending military operations to 10-14 days to neutralize Iran's missile capabilities, fueling concerns over regional stability and energy prices.
Asian markets traded mixed this morning, with Japan’s Nikkei rising 0.8% while China’s Shanghai Composite and South Korea’s KOSPI fell by about 0.7% and 1%, respectively. Hong Kong’s Hang Seng was nearly flat, down 0.1%. Notably, optical component maker Zhongji Innolight dropped 5% on its Hong Kong IPO debut, valued at $6.8 billion. Samsung shares rose 1.6% after reporting a record quarterly operating profit driven by surging AI chip demand.
US futures indicated slight gains, led by Nasdaq futures up 0.4%. This week features heavy corporate earnings reports, including Bristol-Myers Squibb, Amazon, Apple, Coinbase, and Israeli companies Pagaya Technologies and Check Point. Meanwhile, chip stocks continued to decline amid investor concerns over massive AI infrastructure investments and competition from China.
In the bond market, US Treasury yields surged after the Federal Reserve kept interest rates steady at 3.5%-3.75%, with three officials dissenting for a hike. The 30-year yield hit its highest level since 2007 at 5.201%, reflecting inflation worries exacerbated by rising oil prices and Middle East tensions. Gold prices edged higher to about $4,047 per ounce as investors reassessed the Fed’s hawkish stance.
Oil prices retreated slightly this morning after sharp 7% jumps the previous day, despite ongoing conflict escalation including US-Saudi strikes in Iraq and Houthi drone attacks in the Red Sea. Alternative shipping routes around Bab el-Mandeb Strait are mitigating Iran’s leverage over the Strait of Hormuz. Analysts warn that prolonged conflict could erode Iran’s strategic control over oil transit.
Fed Chair Kevin Warsh emphasized the Fed’s commitment to a 2% inflation target and readiness to act if needed, signaling a less flexible approach. The next Israeli interest rate decision is expected in early September, with geopolitical risks and currency weakness influencing expectations. The UK is also set to announce its July rate decision today, with no change anticipated.
