PETER’S BUSINESS & FINANCE BRIEFING – Tuesday 24 June 2025, 06:00 Hong Kong
● Iran fires at US base in Qatar after giving ‘early notice’ ● Oil prices fall 9% after limited Iranian response ● India manufacturing growth strongest in 14 months
Tuesday’s Opening Call
Hang Seng (Hong Kong) Projected Open: 23,767 +78 points +0.3%
Nikkei 225 (Japan) Projected Open: 38,630 +276 points +0.7%
Quick Summary - 4 Things To Know Before Asian Markets Open
Iran has launched missiles at a US airbase in Qatar in response to strikes on its nuclear sites on Saturday. Qatar confirmed the attack and said all the missiles were intercepted, while the Pentagon said there were no reports of US casualties. Donald Trump posted on social media saying Iran's response was "very weak", while also thanking them for "giving us early notice". No Americans were harmed and "hardly any damage was done", he said. "Perhaps Iran can now proceed to Peace and Harmony in the Region, and I will enthusiastically encourage Israel to do the same," he said.
There was little evidence on Monday of investor flight into “safe” assets, despite the spike in Middle East tensions over the weekend Government bonds, gold and the US dollar, which investors often flock to in times of uncertainty, did little to suggest any panic in the markets. Market sentiment returned to ‘risk-off’ in early Asian trading on Monday as hopes for an end to the hostilities in the Middle East dimmed. However, haven assets pared their earlier gains as investors assessed Iran’s limited response to the US strikes on its nuclear facilities.
Oil prices fell sharply Monday as Iran’s muted initial response to US strikes eased fears of disruption to supply. Brent crude, which rose as much as 5.7% in early trading in Asia to $81.40 a barrel, ended the New York session 8.8% lower at $70.24 a barrel. Oil is now almost back to the level of $69.36 it was trading at before Israel launched its attack on Iran.
Manufacturing growth in India hit the strongest level in 14 months in June. The HSBC India Manufacturing PMI rose to 58.4, up from 57.6 in May and above economists’ expectations of 57.7, according to preliminary estimates. This marked the strongest reading since April 2024, driven by a solid rise in new business and a notable pickup in growth for new export orders. The Services PMI increased to 60.7 in June from 58.8 in the previous month. This marked the fastest expansion since last August.
Week Ahead - June 23 to 29
This week, investors will remain focused on developments in the Israel-Iran conflict and the US military involvement, along with updates on global trade negotiations. In addition, Federal Reserve Chair Jerome Powell is set to testify before Congress this week after the central bank held interest rates steady last week, while leaving the door open to cuts in the second half of the year.
On the data front in the US, the personal-consumption expenditures price index, the Fed’s preferred gauge for inflation, is expected, along with personal income and spending data for May. Other key US releases include durable goods orders, the goods trade balance and the University of Michigan’s final consumer sentiment survey for June. Preliminary results showed that sentiment picked up this month after recent dire readings. There will be data on the housing market. The FHFA housing-price index and the S&P Case-Shiller home-price index are both expected for April along with existing home sales for May. Nike, Micron Technologies and Cruise operator Carnival are among the companies set to report earnings this week.
In Asia, the Bank of Thailand meets on Wednesday to decide monetary policy under tricky circumstances with the current coalition government close to collapse. The central bank is expected to cut its policy rate by 25 bps to 1.5%, offering the economy support as it faces a deteriorating economic outlook and heightened risks from US trade policy. There will be inflation data from Australia and Malaysia. Tokyo’s CPI and Core CPI, seen as a leading indicator of price trends nationally, will be released Friday. Trade data is expected from New Zealand, Hong Kong and the Philippines. There will also be industrial production and retail sales from Taiwan. China’s industrial profits will provide an insight into the state of the manufacturing sector and the impact of Trump’s tariffs. South Korean consumer sentiment data this morning will give the first survey results since voters went to the polls to choose a new president in early June. Finally, India is scheduled to post May industrial production figures on Friday. Growth is expected to slow to 2.5% year-over-year from 2.7% in April, dragged lower by export-oriented industries.
On the political front, China’s National People’s Congress Standing Party meets from today through Friday. Investors are hoping for clearer indications of economic support measures. The 2025 NATO summit will be held in The Hague, Netherlands, on 24–25 June. This will be the first NATO summit led by Mark Rutte, new NATO Secretary General and former prime minister of the Netherlands. The main topic under discussion at this summit is expected to be member states' pledge to increase defence spending to 5% of GDP.
On the diplomatic front, Singapore Prime Minister Lawrence Wong is on an official visit to China. Meanwhile, New Zealand Prime Minister Christopher Luxon will meet European Commission president Ursula von der Leyen in Brussels.
Iran Fires At US Base In Qatar After Giving ‘Early Notice’
Iran has launched missiles at a US airbase in Qatar in response to strikes on its nuclear sites on Saturday. Qatar confirmed the attack on the US-run Al Udeid base, calling it a "flagrant violation" and said it reserves the right to respond directly. It added all the missiles were intercepted, while the Pentagon said there were no reports of US casualties.
Donald Trump posted on social media saying Iran's response was "very weak", while also thanking them for "giving us early notice". No Americans were harmed and "hardly any damage was done", he said. No Qataris were killed or wounded, Trump said. "Most importantly, they’ve gotten it all out of their 'system,' and there will, hopefully, be no further HATE. I want to thank Iran for giving us early notice. "Perhaps Iran can now proceed to Peace and Harmony in the Region, and I will enthusiastically encourage Israel to do the same," he said. Trump followed up with a further post saying, "CONGRATULATIONS WORLD, IT’S TIME FOR PEACE!".
Earlier in the day, Donald Trump had raised the possibility of “regime change” in Iran following the US bombing of its nuclear facilities, defying the administration’s insistence that its goals for the operation were limited. Trump posted on social media that "it’s not politically correct to use the term, 'Regime Change,' but if the current Iranian Regime is unable to MAKE IRAN GREAT AGAIN, why wouldn’t there be a Regime change???" That's despite his Defence Secretary Pete Hegseth saying Sunday that "this mission was not and has not been about regime change" and Vice-President JD Vance telling ABC on Sunday, "we don't want to achieve regime change. We want to achieve the end of the Iranian nuclear programme."
Regime change has been a point of contention within Trump's Republican Party. The last Republican President, George W Bush, focused on regime change in Iraq, based on claims of weapons of mass destruction that turned out to be baseless. In the presidential election, Trump campaigned on a promise of "no new wars".
Before Trump’s posts, the US had claimed to have inflicted “extremely severe damage and destruction” on Iran’s nuclear facilities. General Dan Caine, the chairman of the US joint chiefs of staff, said Sunday that seven B-2 bombers had flown for 18 hours from Missouri, dropping 14 “bunker buster” bombs on targets in Iran before returning to the US. Trump declared the facilities “totally obliterated,” a claim difficult to back up through satellite imagery, while a Tehran adviser said its enriched materials remain and that the “game isn’t over.” Iran warned the US of “everlasting consequences” after the US attacks and said “all options” for retaliation are open. Foreign minister Abbas Araghchi said the US had “crossed a very big red line” with its bombing raid.
Israel has left open the possibility that the military campaign will end if US strikes are shown to have destroyed the Islamic republic’s nuclear capabilities. Israel is “close to fulfilling” the goals of its campaign against Iran, Benjamin Netanyahu said on Sunday. “We embarked on this mission to remove these two concrete threats against our existence: the nuclear threat, and the ballistic missile threat,” the Israeli prime minister said in a press conference. “We are very, very close to fulfilling them.”
'Economic Suicide' To Close Key Oil Shipping Lane, US Says
US Secretary of State Marco Rubio has called on China to help stop Iran from shutting down the Strait of Hormuz, a critical trade route, with almost a quarter of the world's oil and gas passing through it. Rubio's comments followed reports on Iranian state TV that the country's parliament had approved a measure to close the narrow waterway at the mouth of the Persian Gulf. "I encourage the Chinese government in Beijing to call them about that, because they heavily depend on the Strait of Hormuz for their oil," said Rubio on Fox News. "If they do that, it will be another terrible mistake. It's economic suicide for them if they do it."
China is Iran’s most important oil customer and maintains friendly relations with the Islamic Republic. Rubio said Sunday that the US retains options to deal with Iran trying to close the strait. “It would hurt other countries’ economies a lot worse than ours,” Rubio told Fox News. “It would be, I think, a massive escalation that would merit a response, not just by us, but from others.” However, the final decision to close the strait lies with Iran’s national security council, rather than parliament. Because Iran also depends on transit through the Strait for its own exports and economy, it would be a particularly risky retaliatory move.
An attempt to block the narrow waterway between Iran and Oman could have profound consequences for the global economy. Some 20 million barrels per day of crude oil, or 20% of global consumption, flowed through the strait in 2024, according to the Energy Information Administration. Asia buys more than four-fifths of all the crude produced in the Middle East, 90% of which goes through the Strait of Hormuz. Oil prices could shoot above $100 per barrel if the strait is closed for a prolonged period, according to Goldman Sachs and consulting firm Rapidan Energy. JPMorgan analysts view the risk of Iran closing Hormuz as low because the US would view such a move as a declaration of war.
China’s foreign ministry said on Sunday that it “strongly condemns” the US attacks on Iran’s nuclear sites, saying they “seriously violate” international law. “The actions of the US seriously violate the purposes and principles of the UN Charter and international law,” the ministry said in its first official response to the strikes. “China calls on the parties to the conflict, Israel in particular, to reach a ceasefire as soon as possible,” it added. Fu Cong, China’s ambassador to the UN, warned against “adding fuel to the fire” and called on Israel to prevent the conflict spilling into a broader regional war. “China is deeply concerned that the situation may go out of control,” said Fu.
Airlines Cancel Middle East Flights
British Airways and Singapore Airlines have cancelled flights to Dubai after the US struck three nuclear sites in Iran. More than 150 carriers including Air France-KLM, American Airlines and Japan Airlines had already diverted or suspended flights after airspace over Israel, Iraq and Jordan was closed because of the war between Israel and Iran. On Monday, airspace was closed in Qatar and also shut in Bahrain and the United Arab Emirates.
Supertankers Do U-Turns Around Hormuz After US Airstrikes
Two supertankers, each capable of hauling about 2 million barrels of crude, U-turned in the Strait of Hormuz before one returned to the waterway as US airstrikes on Iran raised risks for shipping to and from the Persian Gulf. The Coswisdom Lake and South Loyalty both entered the waterway and abruptly changed course on Sunday, according to vessel tracking data compiled by Bloomberg. The first of the two carriers then did a second U-turn and is now going back through Hormuz. The other one remains outside of the Persian Gulf, according to its signals on Monday. The turning oil carriers offer the first signs of re-routing. Coswisdom Lake is managed by Cosco Shipping Energy and South Loyalty by Sinokor Merchant Marine, according to industry databases.
Meanwhile, Middle East ocean freight rates have soared since the Iran conflict started and on the risk of disruption to the Strait of Hormuz. Ocean freight rates from Shanghai to the Port of Khor Fakkan on the United Arab Emirates’ Indian Ocean coastline are up 76% compared to mid-May, reaching $3,341 per forty-foot equivalent unit. The spread between long-term rates and spot rates has surged from $50 to $1,100. “Shippers in the region have acted with caution as the level of risk has gradually increased,” said Peter Sand, chief shipping analyst at Xeneta. “Shippers have been front loading cargo in the most recent months, to bolster the supply chain from adverse disruptions to the flow of containerized goods.”
Taiwan President Launches ‘National Unity’ Drive
Taiwan’s president on Sunday launched a drive for national unity in a move intended to overcome domestic partisan battles. William Lai asserted Taiwan’s de facto independence in the first of 10 speeches planned for the coming weeks under the motto “Unite Taiwan”. He highlighted the centuries during which Taiwan was separate from China and said that because it had its own territory, people, government and sovereignty, “of course Taiwan is a sovereign state!” A senior official in Lai’s ruling Democratic Progressive party said Lai’s push was meant for a domestic audience. It comes as the party campaigns to reclaim control of parliament through a July 26 vote to recall nearly half of the lawmakers of the largest opposition party, the Kuomintang. In the planned speeches, Lai will promote his views on topics including nation, cross-Strait relations, democracy and peace.
Thai PM Clings To Power
Thai leader Paetongtarn Shinawatra is trying to ride out a political crisis engulfing her government amid a border clash with neighbouring Cambodia. Paetongtarn's government is facing challenges, including a reduced majority in parliament and legal challenges that could oust her, but she is trying to cling to power with the support of smaller parties. The prime minister on Sunday made clear her intention to stay on, despite speculation that a key party in her ruling alliance was pushing for her resignation. Her Pheu Thai Party said she will neither resign nor dissolve parliament. The political turmoil is affecting Thailand's economy, with the stock market at a five-year low, and there are concerns that prolonged instability could prompt military intervention or further disrupt global energy markets.
Tokyo Voters Punish Japan Ruling Party Ahead Of National Election
Voters in Tokyo decisively knocked Japan’s ruling party from its position as the largest group in the city assembly, results showed on Monday, a warning sign for Prime Minister Shigeru Ishiba’s unpopular government before July elections. Japanese media said it was a record-low result in the key local election for the Liberal Democratic Party (LDP), which has led the country almost continuously since 1955. Public support for Ishiba, who took office in October, has been at rock-bottom for months, partly because of high inflation, with rice prices doubling over the past year.
The LDP took 21 Tokyo assembly seats in Sunday’s vote, including three won by candidates previously affiliated with the party but not officially endorsed following a political funding scandal. This breaks the party’s previous record low of 23 seats from 2017, according to the Asahi Shimbun and other local media. Tomin First no Kai, founded by Tokyo governor Yuriko Koike, increased its seats in the 127-member assembly to 31, becoming the largest party. The opposition Democratic Party For the People (DPP) won seats for the first time in the Tokyo assembly vote, securing nine.
Within weeks Ishiba will face elections for parliament's upper house, with reports saying the national ballot could be held on July 20. Voters angry with rising prices and political scandals deprived the 68-year-old's ruling coalition of a majority in the powerful lower house in October, its worst general election result in 15 years.
Australia Private Sector Expands For Ninth Straight Month
May figures from Australia showed that the private sector expanded at its second-fastest pace in ten months, with services growth hitting a three-month high, while manufacturing growth remained steady. The S&P Global Flash Australia Composite PMI rose to 51.2 in June from 50.5 in May, marking the ninth consecutive month of private sector growth and the second-fastest pace in the past ten months. The expansion was supported by stronger new business inflows, though export orders declined sharply. Business sentiment improved midway through the year, and employment levels continued to rise. On the price front, both input cost and output price inflation eased in June. Notably, the rate of output price inflation fell to its lowest level in over four-and-a-half years, suggesting a cooling of price pressures as the second quarter ended. The upbeat PMI figures offered some relief regarding Australia’s economic resilience following a string of weak data that had strengthened short-term rate cut expectations.
Japan Composite PMI Highest In 4 Months
Manufacturing activity in Japan expanded in June after nearly a year of contraction. The au Jibun Bank Japan Composite PMI rose to 51.4 in June from a final 50.2 in the prior month, flash data showed. It marked the third straight month of growth in private sector activity and the fastest pace since February, amid a renewed expansion in manufacturing, the first since May 2024, alongside the third straight month of growth in the services sector. The Manufacturing PMI increased to 50.4 in June from May’s 49.4, while the Services PMI rose to 51.5 from a final 51.0 in May. While output accelerated and employment grew the most in nearly a year, overall demand conditions remained subdued. Firms reported that US tariffs and ongoing uncertainty over the global trade outlook continued to dampen customer demand. Overall sentiment hovered near post-pandemic lows.
Singapore Inflation Rate Lowest Since 2021
Singapore’s annual inflation rate edged down to 0.8% in May, from 0.9% over the previous three consecutive months, matching economists’ expectations. This marked the lowest reading since February 2021, as prices ticked lower for food (1.1% vs 1.4%) and transport (1.7% vs 1.8%). Costs accelerated for health (2.7% vs 2.5%), while remaining unchanged for housing and utilities (1%). On a monthly basis, the CPI rose by 0.7% in May, rebounding from a 0.3% decline in April. Meanwhile, the annual core inflation rate ticked down to 0.6% in May from a three-month high of 0.7% in the preceding month.
Taiwan Jobless Rate Lowest Since 2000
Taiwan’s seasonally adjusted unemployment rate edged down to 3.34% in May 2025, from 3.36% in the previous month, marking the lowest level since November 2000. The youth unemployment rate, which tracks job seekers aged 20 to 24, fell to a four-month low of 11.14%, from 11.30% in April. Meanwhile, the labour force participation rate edged higher to 59.37% in May, compared to 59.34% in the previous month.
India Manufacturing Growth Strongest in 14 Months
Manufacturing growth in India hit the strongest level in 14 months in June. The HSBC India Manufacturing PMI rose to 58.4, up from 57.6 in May and above economists’ expectations of 57.7, according to preliminary estimates. This marked the strongest reading since April 2024, driven by a solid rise in new business and a notable pickup in growth for new export orders. The Services PMI increased to 60.7 in June from 58.8 in the previous month. This marked the fastest expansion since last August, as output and new orders continued to rise. The Composite PMI rose to 61.0 from a final 59.3 in the previous month, beating market forecasts of 59.4 and reaching its highest level since April 2024. On prices, input cost increased modestly, with inflation easing to a 10-month low and below the long-term average. Output price inflation also softened from May’s six-month high.
US Private Sector Growth Slows Slightly in June
The S&P Global US Composite PMI edged down to 52.8 in June from 53 in May, signalling a slight cooling in private sector growth while marking the 29th consecutive month of expansion, according to a flash estimate. Service sector output eased modestly (53.1 vs. 53.7), though remained robust, while manufacturing held steady at a 15-month high of 52.0. Business activity and new orders continued to grow, but momentum weakened as exports of both goods and services declined amid rising trade tariffs. Notably, service exports saw their steepest quarterly contraction since late 2022. Job creation was observed for the fifth month. Meanwhile, price pressures intensified in June, largely due to tariffs, but also reflecting rising financing, wage, and fuel costs. However, input costs and selling prices in the services sector rose more slowly than in May, partly due to stronger competitive pressures.
US Home Sales Beat Expectations But Remain Low
Sales of existing homes rose slightly in May but held near historically low levels, the latest sign that buyers are staying away because of high home prices. Sales of previously owned homes rose 0.8% in May from the prior month, the National Association of Realtors said. That was better than the 1.3% fall expected by economists. Sales were still subdued, coming in at a seasonally adjusted annual rate of 4.03 million. That was the slowest sales pace for any May since 2009.
Risky Assets Recover As Iran’s Response Seen As Restrained
There was little evidence on Monday of investor flight into “safe” assets, despite the huge spike in Middle East tensions over the weekend Government bonds, gold and the US dollar, which investors often flock to in times of uncertainty, did little to suggest any panic in the markets. Market sentiment returned to ‘risk-off’ in early Asian trading on Monday as hopes for an end to the hostilities in the Middle East dimmed. However, haven assets pared their earlier gains as investors assessed Iran’s limited response to the US strikes on its nuclear facilities. The MSCI All Country World Index has pulled back 1.5% since Israel attacked Iran on June 13. Asian and European shares fell Monday as the Israel-Iran conflict entered its 11th day. Bitcoin slid below $100,000 for the first time since May before rebounding
The US dollar initially strengthened as investors headed for relatively safer currencies after the US strikes on Iran. The US Dollar Index rose in early trading on Monday in Asia but had given up all of its gains and more by the close of the US Session. The US currency, which usually fares well during times of elevated global geopolitical tensions, gained 0.6% against a basket of peers last week, its best week since February. The dollar has climbed just over 1% since hitting a three-year low earlier this month.
Oil remained the primary focus for investors. Crude prices initially jumped to a five-month high in early Asian trading after the US bombed Iran’s nuclear facilities, increasing the possibility that Tehran would respond by attacking energy infrastructure in the region or shipping in the Strait of Hormuz. Brent crude, the international benchmark, soared as much as 5.7% as trading began in Singapore on Monday. However, by the end of the US trading session, Brent crude was down almost 9%. Oil prices were up at one stage about 14% after Israel launched its first surprise attack on Iran 11 days ago. But that premium has now been almost completely eliminated.
David Roche, President & Global Strategist at Quantum Strategy, wrote in a note Monday, “the time of maximum risk is over. The Mullahs will shift to survival mode. They will not seek to escalate militarily – though a few revenge suicide bombings could happen. Any significant escalation by Iran will yield a worse outcome for the Mullahs than lying pretty flat. President Trump is at the optimum point on the political yield curve. I doubt he’ll go for more as Iran’s nuclear threat is de facto destroyed. The Israelis will bomb on for a week or two. But they will settle for decimation of the Iranian military machine and forego regime change. Markets will return to business as usual. There’s plenty to worry about US tariffs and budget in July. But the war premium will vanish from safe haven assets.”
Asia-Pacific Stock Markets Decline As Middle East Crisis Escalates
Asia-Pacific markets mainly declined Monday as US stock index futures fell after the United States’ attack on three nuclear sites in Iran raised oil prices and prompted fears of an escalation in the Middle East conflict. Japan’s Nikkei 225 fell for a third session, losing 0.1% to 38,354. In South Korea, the Kospi index lost 0.2%. In Australia, the S&P/ASX 200 sank 0.4%. India’s BSE Sensex was 0.6% lower at 81,897.
Asian defence stocks rose while tech stocks declined across the region on Monday. In Japan, semiconductor manufacturer Screen Holdings, Lasertec and Disco Corp all fell 1.6%. In South Korea, LG Energy Solution (-3.6%) and Samsung Electronics (-2.5%) fell.
Shares of travel-related stocks in Asia-Pacific extended their declines Monday following a surge in oil prices and as airlines suspended flights to the Middle East. Losses in Japan were seen in Japan Airlines, which was down 1.6% and ANA Holdings which lost 1.1%. Other carriers in Asia-Pacific were also trading in negative territory, with Australia’s Qantas Airways down 1.9% and South Korea’s Asiana Airlines down 1.6%. Losses were also seen in other travel-related companies such as South Korean tour operators Lotte Tour Development which tumbled 2.8%, Modetour Network which was down 2.4% and Hana Tour which lost 2.2%.
Auto stocks in Asia sank Monday, in line with the wider sell-off in the region after the US′ strikes on Iran. Mazda Motor led losses among Japanese automakers, falling 2.0%. South Korea’s Hyundai Motor and Kia Corp also logged declines, closing down 1.3% and 2.8% respectively.
Hong Kong Stocks Outperform
In Hong Kong, shares rebounded from early losses and outperformed their regional peers for a second day in choppy trading. The Hang Seng moved up 159 points, or 0.7%, to close at 23,689. The Hang Seng Tech Index was up 1.0%. Among the best performers were Li Auto which surged 5.5%, Hua Hong Semiconductor which gained 4.4% and Semiconductor Manufacturing International Corp which added 4.6%.
On the mainland, the CSI 300 fell 0.3% to 3,858. Investors digested China’s FDI data, which showed a 13.2% y/y decline in the first five months of 2025, despite a surge in high-tech sector investments. Traders are closely watching the meeting of the National People’s Congress Standing Committee, which starts today, where discussions are expected to focus on anti-competition legislation and possible responses to newly imposed US tariffs and rising geopolitical risks.
Shipping stocks such as Ningbo Marine (+10.1%) and Nanjing Tanker (+7.6%) advanced on speculation that tanker freight rates may rise following the US airstrikes.
European Stock Markets Start The Week Lower
Sentiment among investors in Europe worsened after the United States entered Israel’s war against Iran over the weekend. The pan-European Stoxx 600 closed 0.3% lower. Banks, chemicals and insurance were the biggest losers, each down around 1%, while utilities and technology gained 1.3% and 0.9%, respectively. The UK’s FTSE 100 fell 0.2%.
The Stoxx Europe Aerospace and Defence index closed 0.7% lower, starting the week on a negative note after gaining 1.1% over the course of last week. German defence giant Rheinmetall was 1.0% lower, paring earlier losses, while Sweden’s Saab shed 1.9% and France’s Thales was down by 0.4%.
Data released Monday showed the Eurozone Composite PMI remained unchanged from the previous month at 50.2 in June, slightly under economists’ expectations of 50.5, according to a flash estimate. The Manufacturing PMI came in at 49.4 in June, the same as in May. The Services PMI rose to 50.0 in June from 49.7 in May.
US Stocks Rise As Oil Slides
On Wall Street Monday, US stocks rose as crude oil prices tumbled and investors breathed a sigh of relief that Iran’s response to the US attacks over the weekend was more restrained than expected. Iran’s armed forces said Monday they attacked an American base in Qatar after the US hit Iranian nuclear sites in Fordo, Isfahan and Natanz over the weekend. The response, however, was intercepted by Qatar and no casualties were reported. This led to a sell-off in oil as traders bet crude supply wouldn’t be materially disrupted by the ongoing conflict.
The Dow added 375 points, or 0.9%, ending at 42,582. The S&P 500 gained 1.0% and closed at 6,025. The Nasdaq Composite climbed 0.9% and settled at 19,631.
“The retaliation seems to be very measured,” said Jason Pride, chief of investment strategy and research at Glenmede. While the situation could change quickly, he added, Iran's missile salvo seemed “very coordinated and intended to make it appear that Iran is not escalating.”
Defence names nudged higher as global investors monitored the fallout from the US air strikes on Iranian nuclear targets. Northrop Grumman (+0.4%), Lockheed Martin (+0.4%), Palantir (+1.9%) and L3Harris Technologies (+0.6%) all rose but closed well off their highs.
Tesla surged 8.2% after the EV maker launched its long-awaited robotaxis over the weekend. Northern Trust jumped 8% after the Journal reported that Bank of New York Mellon approached its smaller rival regarding a potential merger. Shares of Hims & Hers Health plummeted almost 35% after Novo Nordisk terminated its partnership with the telehealth company, citing concerns about its marketing practices. US-listed shares of Novo Nordisk fell 5.5%.
Treasury Yields Fall
Treasury yields fell after Federal Reserve governor Michelle Bowman said Monday, she could support a July interest-rate cut. Following similarly dovish remarks last week from another Fed governor, Christopher Waller, Bowman’s comments were a sign that support is building for a looser monetary stance. The 10-year yield fell 4 bps to 4.34%, while the yield on the 2-year note was off 5 bps at 3.86%.
Futures prices now imply a 22.7% chance of a rate cut next month, up from 14.5% Friday, according to CME Group's FedWatch tool. Traders are anticipating two 25 bps rate cuts before the end of the year.
Asia Pacific Currencies Weaken Against The Dollar
The US Dollar Index, which measures the currency against six major rivals, gained as much as 0.3% in early Asian trading. But gains dissipated and the greenback was down 0.4% by the end of US trading.
Asia-Pacific currencies depreciated against the dollar on Monday as investors assessed the impact of the escalating tensions in the Middle East. The Japanese yen, which is traditionally viewed as a safe asset during times of tumult, weakened 0.3% against the dollar to a five-week low of ¥146.52 before rebounding to ¥146.05. China’s offshore yuan depreciated 0.2% to around Rmb 7.19 against the dollar. The Taiwanese dollar weakened 0.3% to 29.657. The South Korean won depreciated 0.5% against the dollar to 1,380.20. The country’s acting finance minister Lee Hyoung-il said earlier in the day that the government would closely monitor financial markets and energy supplies and respond if needed. The Philippine peso weakened by 0.8% to 57.573, after hitting its lowest level since April 9 earlier in the session. Meanwhile, the Malaysian ringgit weakened by 0.6% to 4.2779 against the greenback.
Some of Asia's biggest central banks look to be dialling back their interventions in the currency market, including those of India, Malaysia and Taiwan. A major reason is that the dollar has tumbled more than 7% this year, easing pressure on emerging market currencies. But strategists and investors also point to the risk of a backlash from Trump, amid rising speculation that currency policies will be on the table during trade negotiations.
Gold Remains Volatile As Mideast Conflict Escalates
The price of gold, a traditional haven asset, ticked up 0.1% to $3,373 an ounce. Prices for bullion traded as high as $3,395 in the Asian session. Gold prices remain elevated and are close to the record of $3,500 hit in April.
Oil Prices Plunge After Hitting 5-Month High In Volatile Trading
Oil prices fell sharply Monday as Iran’s muted initial response to US strikes eased fears of disruption to supply. Brent crude, which rose as much as 5.7% in early trading in Asia to $81.40 a barrel, ended the New York session 8.8% lower at $70.24 a barrel. Oil is now almost back to the level of $69.36 it was trading at before Israel launched its attack on Iran.
Investors are hoping that Iran calibrated the attack to avoid further escalation in its conflict with the US and Israel. The oil market has so far avoided its worst-case scenario in which Iran chokes off energy exports from the Persian Gulf.
“While Iran has flirted with closing the Strait of Hormuz, investors aren’t terribly panicked about an oil market calamity, an equanimous view that’s appropriate at this point,” wrote Adam Crisafulli of Vital Knowledge in a Monday note. “Geopolitical risks are undoubtedly elevated in the Middle East right now, but our view remains that the extreme asymmetry of the conflict (with Iran’s military capabilities, and those of its proxy partners, significantly degraded), coupled with Tehran’s relative isolation (with few, if any, allies willing to come to its assistance) and ample global oil supplies, will help keep the fallout contained.”
Deutsche Bank analysts said in a note Monday, “in terms of what this all means for markets going forward, it’s really all about whether the Iranian regime weaponizes oil, and in particular whether they seek to close the Strait of Hormuz where over 20% of the world’s oil flows daily.
Bitcoin Drops Below $100,000 Before Recovering
Bitcoin dropped below the $99,000 mark on Monday morning in Asian trading, its lowest point in more than a month, as the crypto market became the first to react to escalating geopolitical risk. Bitcoin fell to $98,255, down almost 5%, while ether had dropped 5% to below $2,200. Solana, XRP, and dogecoin also posted sharp losses, dragging the entire crypto complex deep into the red. But crypto prices recovered after Iran’s limited response to the US attacks. By the end of the New York session, Bitcoin had rebounded to $108,830, up over 5% over the past 24 hours.
Peter Lewis’ Money Talk Podcast
On Tuesday’s “Peter Lewis’ Money Talk” podcast, I’ll be joined by Mark Michelson, Chairman of the Asia CEO Forum at IMA Asia, Gary Ng, senior economist for Asia Pacific thematic research at Natixis, and in Washington D.C., our US Economics Correspondent, Writer & Broadcaster, Barry Wood.
The podcast is also available on Apple Podcasts, YouTube Studio and Spotify.
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https://www.youtube.com/playlist?list=PLnwqOJD9ie5gHH29bNfuG1Nscy8rdJo6O
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This podcast is sponsored by Surfin Group, which is headquartered in Singapore and offers online financial services to 60 million customers across 10 countries. You can find out more about them by going to their website www.surfin.sg
