The dominant macro driver remains the stagflationary shock stemming from the US-Iran conflict and its disruption to Strait of Hormuz shipping lanes, with US headline CPI running at 4.2% and PPI at 6.5% — levels that have forced a decisive pivot back to monetary tightening across major central banks. The ECB has already lifted its deposit facility rate to 2.25% as of 17 June, with further hikes signalled; the Fed is holding at 3.50%–3.75% under Chair Kevin Warsh but is widely expected to resume tightening in late 2026; and the BoJ delivered a 25bp hike to 1.0% in June, with board member Tamura explicitly targeting a neutral rate of 2%. The 18 June US-Iran MOU raised hopes of a normalisation, pulling energy prices off their highs — Brent is currently at $73.75/bbl and WTI at $70.52/bbl — but no final agreement has been reached, and the 60-day negotiating window leaves the risk of renewed disruption open. US 10-year yields are at 4.38% and 30-year yields at 4.87%, pricing a prolonged higher-for-longer regime that is compressing global risk appetite at the long end of the curve.
For Asia-Pacific markets, the cross-asset pressure is concentrated most acutely in tech-heavy indices — the KOSPI fell 5.81% Monday and the TWSE dropped 3.64%, with the Nikkei 225 down 4.15% — as a global repricing of AI valuations combined with the broader rate shock triggered a sharp risk-off rotation. USD/JPY holding at 161.94 reflects sustained yen weakness despite the BoJ's June hike, consistent with CFTC data showing net short yen positions at $10.1 billion — a level that historically has preceded sharp carry trade unwinds if BoJ guidance turns more hawkish. CNY is marginally firmer at 6.7931, with PBOC policy on hold and LPRs unchanged at 3.00%/3.50% for 13 consecutive months, suggesting Beijing is leaning on exchange rate stability rather than rate stimulus. KRW is under pressure at 1,540.26 per dollar, reflecting Korea's acute sensitivity to both AI chip cycle volatility and elevated energy import costs.