Source: Sharecast
Oil prices initially surged on the news before easing back, while currency markets reflected increased demand for the US dollar.
“Early market reactions to the weekend news of US strikes on Iran have been more subdued than anticipated,” said TickMill market strategy partner Patrick Munnelly.
“The 10-year US Treasury yield ... has risen just two basis points, with all overnight price movements remaining within Friday’s range.
“While oil prices initially surged - Brent crude opened at $81.40 per barrel compared to Friday’s close of $77.42 - they have since retreated to approximately $78 per barrel.”
Munnelly noted that In forex markets, the dollar index was about 0.3% stronger but remained below levels seen last Thursday.
“Asian equity indices are broadly in negative territory, though declines are modest, and S&P futures are down by only around 0.2%.
“The uncertain nature and timing of Iran’s response could significantly alter market dynamics throughout the day and into the week.
“Energy markets, in particular, may react sharply if access to the Strait of Hormuz - a critical oil shipping route - is disrupted.”
Evolving perceptions of whether the conflict could escalate to involve regime change in Iran could weigh on broader risk sentiment, Munnelly added.
“Sector-specific impacts are also worth noting.
“For instance, reports suggest significant disruptions and rerouting for airlines, which are also grappling with higher energy costs.
“Meanwhile, expectations regarding the scope of the conflict may further influence valuations of defence companies.”
Regional markets mostly lower after US strikes on Iran
Japan’s Nikkei 225 edged down 0.13% to 38,354.09, pressured by sharp losses in Tokyo Electric Power, which fell 4.17%, Sumitomo Dainippon Pharma, down 3.06%, and Tokuyama, which dropped 3%.
The broader Topix index lost 0.36% to close at 2,761.18.
China’s markets gained despite the geopolitical uncertainty - the Shanghai Composite rose 0.65% to 3,381.58, supported by strong gains of 10.1% in both Nuode Investment Co and Inzone Group, while Ningbo Marine added 10.09%.
The Shenzhen Component climbed 0.43% to 10,048.39.
Hong Kong’s Hang Seng Index added 0.67% to 23,689.13, led by Li Auto, up 5.49%, Zhongsheng Group, which rose 4.91%, and SMIC, up 4.56%.
In South Korea, the Kospi 100 dropped 0.27% to 3,021.16.
LG Chemicals declined 4.26%, SKC lost 4.12%, and Hyundai Motor fell 4.05%.
Australia’s S&P/ASX 200 slipped 0.36% to 8,474.90.
Appen fell 5.83%, Brambles was down 5.01%, and Mesoblast lost 4.57%.
New Zealand’s S&P/NZX 50 also weakened, falling 0.29% to 12,532.65.
ANZ Group dropped 3.61%, Heartland Group declined 3.57%, and Tourism Holdings lost 3.49%.
The dollar strengthened against regional currencies, rising 1.01% on the yen to last trade at JPY 147.56, as it gained 0.66% against the Aussie to AUD 1.5601, and climbed 0.83% on the Kiwi to change hands at NZD 1.6895.
Oil prices, which rose sharply during early Asian trading, later pared gains.
Brent crude futures were last down 0.22% on ICE at $76.84 per barrel, while the NYMEX quote for West Texas Intermediate fell 0.22% to $73.68.
Japan’s manufacturing sector returns to growth in June
In economic news, Japan’s manufacturing sector returned to expansion in June for the first time in nearly a year, according to flash data from S&P Global.
The au Jibun Bank manufacturing purchasing managers’ index (PMI) rose to 50.4 in June from 49.4 in May, moving above the 50 threshold that signals growth.
That marked the strongest reading since May 2024.
The improvement was driven by faster employment growth, as well as increases in output and inventories.
However, S&P noted that overall demand conditions remained subdued, with both new business and export orders continuing to decline.
In the services sector, activity also strengthened.
The au Jibun flash services PMI rose to 51.5 in June from 51.0 in May, supported by growth in new business.
Export demand in services rose more slowly, but the overall gain contributed to a broader uptick in economic activity.
The composite PMI, which combines manufacturing and services data, climbed to 51.4 in June from 50.2 in May.
That marked the highest level since January and suggests a modest but broad-based improvement in Japan’s private sector output.
Reporting by Josh White for Sharecast.com.
