The dominant macro driver overnight was a sharp escalation in US-Iran military tensions, with US strikes on Iranian targets following Iranian actions against ships and bases — a geopolitical shock that sent WTI crude surging 5.82% to $90.75/bbl and Brent 5.26% higher to $95.25/bbl, the most significant single-session energy price move in recent memory. The oil spike compounded an already fragile inflation picture: US 10-year Treasury yields rose 2bp to 4.75% and the 30-year climbed 3bp to 5.25%, with the 10-year reportedly touching its highest levels since January 2025 intraday. CME FedWatch pricing now implies approximately 68% odds of a 25bp Fed hike at the September meeting, up sharply from ~40% a week prior, reflecting how quickly the energy-driven inflation narrative has repriced the Fed path under Chair Kevin Warsh. The VIX jumped 9.52% to 16.34, confirming a decisive deterioration in risk appetite as September opens.
For Asia-Pacific investors, the cross-asset transmission is multi-channel and acute. The yen sits at 160.19 per dollar — up 0.28% on the session — a level that keeps pressure on the Bank of Japan, with markets now pricing approximately 73% odds of a BoJ rate hike in September and the 10-year JGB yield having touched 3% for the first time since 1996. Japan's energy-import-heavy economy faces a direct cost shock from $90+ oil, though domestic energy names such as Kansai Electric (9503.T, +7.58%) and Tokai Carbon (5301.T, +7.70%) were the session's standout Nikkei gainers. The AUD/USD fell 0.39% to 0.7145, reflecting commodity-mix ambiguity — oil positive for energy names but precious and industrial metals broadly weaker, with gold down 1.28% to $4,374.40/oz, copper off 0.96% to $6.5305/lb, and the ASX Materials sector the session's worst performer at -1.06%. The KRW weakened 0.54% to 1,373.96 per dollar, adding currency headwind to Korean tech exporters even as semiconductor export data remained firm.