Escalating US-Iran military exchanges drove the dominant risk-off narrative on Monday, lifting crude oil prices — Brent to $89.22/bbl (+1.27%) and WTI to $83.23/bbl (+0.90%) — while weighing on broad equity indices across the US, UK, and much of Asia-Pacific. Central bank policy divergence continues to frame the macro backdrop, with the ECB having hiked its deposit rate 25 bps to 2.25% in June amid sticky 2026 inflation projections of 3.0%, the Bank of England's next decision due July 30, and the Fed's FOMC meeting scheduled for July 28-29. Gold held near record territory at $4,010/oz despite the geopolitical flare-up, while the VIX eased modestly to 18.65, suggesting contained but elevated anxiety in US markets. The US dollar firmed (DXY +0.24% to 100.99), adding a further headwind for commodity and emerging-market assets priced in USD.
For Asia-Pacific markets opening Tuesday, the dominant read-through is a cautious one: energy price strength supports Australian energy names, but the broad risk-off from Middle East tensions and soft US equity close — S&P 500 -0.19%, Russell 2000 -0.67% — argues for a muted ASX open, consistent with the ASX 200's own prior-session decline of 0.06%. The Nikkei's sharp 4.03% selloff and the KOSPI's 4.46% drop signal acute regional stress, likely driven by a combination of geopolitical risk and USD/JPY printing at 162.51, squeezing yen-sensitive exporters. Hong Kong and Shanghai bucked the trend — HKEX +2.36%, SSE +0.85% — providing a partial offset for China-exposed ASX resources names, while the ASX VIX at a low 11.38 (-1.73%) suggests local volatility expectations remain well anchored relative to the Nikkei VIX's alarming spike to 36.86 (+14.22%).