- The escalation of the US-Iran conflict has heightened risk aversion in financial markets, putting pressure on Asian stock markets, with the MSCI Asia Pacific ex-Japan Index significantly declining.
- Although the Middle East situation temporarily pushed oil prices higher, the price of London Brent crude futures retreated from its peak after Israel and Lebanon reached a ceasefire agreement.
- The foreign exchange and cryptocurrency markets experienced increased volatility, with the yen stabilizing and rebounding against the dollar at a key level, while Bitcoin fluctuated at a near four-month low.
Geopolitical Conflict Reignites Cross-Asset Risk Aversion
During Thursday's Asian trading session, global financial market liquidity shifted towards safe-haven assets due to renewed military clashes between the US and Iran. The MSCI Asia Pacific (ex-Japan) Index (.MIAPJ0000PUS) fell sharply, the Nikkei 225 Index (NI225:JP) closed down 1.4%, and the Korea Composite Stock Price Index plunged by as much as 2.6%. US stock futures also showed weakness, with S&P 500 mini futures (EScv1) down 0.4%. On the previous trading day, major Wall Street indices collectively closed lower, with the S&P 500 Index (SPX:US) recording a 0.7% decline. Analysts at Westpac noted that the renewed hostilities between the US and Iran forced market trading to revert to a defensive mode.
Ceasefire Agreement Suppresses Oil Premium
In the energy market, supply and demand expectations are complexly influenced by geopolitical factors. On the previous trading day, international oil prices surged by about 2% due to a lack of progress in negotiations between Tehran and Washington. However, after Lebanon and Israel reached a ceasefire agreement, London Brent crude futures (BRN1!) saw profit-taking on Thursday, with prices falling 0.7% to $97.14 per barrel. According to the agreement, the ceasefire is contingent on the pro-Iranian Hezbollah militia completely ceasing fire and withdrawing from the southern Litani region. Although there was a precedent of a ceasefire agreement failing last month, this development effectively eased the geopolitical risk premium in the oil market in the short term. Meanwhile, although the US House of Representatives passed a resolution aimed at limiting the President's war powers against Iran, its symbolic significance outweighs its substance.
Economic Data Outlook and Rising Rate Hike Expectations
In terms of macroeconomic data, the US May ISM Services PMI exceeded market expectations, indicating a rebound in business activity. However, traders generally believe that the rebound in this data partly stems from businesses' concerns about Middle East conflicts causing supply chain disruptions, leading them to place orders in advance and replenish inventories, not entirely reflecting strong endogenous demand. In the foreign exchange market, the yen (USDJPY) slightly rebounded by 0.1% to 159.91 against the dollar, temporarily moving away from the official intervention threshold of 160. Japan's Chief Cabinet Secretary Hirokazu Matsuno and Bank of Japan Governor Kazuo Ueda both released hawkish signals, suggesting that if inflation risks continue to outweigh economic downside risks, the possibility of discussing a rate hike this month will significantly increase.
Tech Giants' Earnings Under Pressure and Cryptocurrency Adjustments
In the corporate and digital asset sectors, the artificial intelligence sector shows signs of high valuation corrections. Semiconductor giant Broadcom (AVGO:US) reported second-quarter revenue that fell short of Wall Street expectations. Despite management maintaining its long-term sales guidance for fiscal year 2027, its stock price fell sharply after hours, with an adjustment of over 13%, sparking discussions about the sustainability of growth in demand for AI chips. Additionally, the volatility in risk assets has also affected the digital currency market, with Bitcoin (BTCUSD) declining for five consecutive trading days, hitting a four-month low before slightly rebounding to $64,118.15. Analysts pointed out that the US Dollar Index (DXY) remaining at a high of 99.45 and the relative firmness of US Treasury yields continue to exert liquidity pressure on crypto assets.
