The week ending 11 September was dominated by escalating Middle East tensions, as US-Iran strikes on oil tankers and Houthi territorial gains threatened both the Bab al-Mandab Strait and the Strait of Hormuz, driving Brent crude above US$104/bbl and WTI above US$100/bbl on weekly gains exceeding 8% before a partial Friday retreat on diplomatic hopes for a temporary Hormuz shipping arrangement. Simultaneously, the ECB delivered a 25bp rate hike to 2.5% on 10 September with upward inflation revisions and a hawkish forward signal from two policymakers flagging further rises, while US August core CPI printed at 0.3% month-on-month against a 0.2% consensus, pushing Fed hike odds for the 16 September meeting to approximately 87–90%. Risk sentiment was decidedly mixed across the week — equities ultimately snapped losing streaks on Friday, with the VIX falling 11.2% to 15.84, though the relief was uneven across regions and asset classes. The dominant narrative heading into this week is one of synchronised central bank tightening layered on top of a genuine geopolitical energy shock, a combination that compresses multiples and rotates capital away from duration-sensitive assets.
For Asia-Pacific markets opening today, the Friday Wall Street bounce — S&P 500 +0.86%, Nasdaq +0.96%, led by AI infrastructure names — provides a modestly constructive overnight lead, but the regional picture remains challenged by the yield backdrop and energy cost pressures. US 2-year and 10-year Treasury yields rose 13bp and 12bp respectively on Friday to 4.56% and 4.95%, a move that is unambiguously negative for rate-sensitive sectors across the ASX including REITs and utilities, and the USD/JPY sitting at 154.48 keeps the yen under pressure and adds further complexity for Japanese equity investors. The ASX 200 closed down 0.89% on Friday to 8,741.2 with the local VIX (XVI) rising 9.28% to 14.36, signalling that domestic hedging demand increased even as the US VIX compressed — a divergence worth monitoring closely as the local session opens.