The dominant macro driver overnight was the surge in crude oil, with Brent crossing $100/bbl for the first time in over a month — closing at $101.67 — and WTI settling at $96.85, both up roughly 4% on the session, as US-Israel military actions against Iran entered their seventh month with strikes reported near the Strait of Hormuz and on energy infrastructure. That move is feeding directly into the rates complex: US 10-year Treasury yields rose 2bp to 4.80% and the 30-year hit 5.25%, levels that signal the market is pricing a sustained inflation re-acceleration that complicates the Fed's September 15-16 FOMC calculus, particularly ahead of Thursday's PPI print (consensus 0.4% m/m headline) and Friday's CPI. The ECB is simultaneously expected to hike 25bp to 2.65% at its Thursday decision, compounding the global tightening impulse. VIX edged up 4.71% to 16.46, while the Nikkei VIX surged 46.61% to 32.05 — a sharp divergence that flags Japan-specific volatility stress rather than a broad global fear spike.
For Asia-Pacific, the pressure is concentrated in sectors most exposed to energy cost pass-through and yen dynamics. TOPIX Autos & Transport fell 4.41% and Electrical Equipment dropped 3.91% in the prior session — both classic victims of a stronger yen and higher input costs as BoJ rate-hike expectations build toward the September 17-18 meeting. USD/JPY held at 153.60, up fractionally, but the Nikkei VIX reading suggests options markets are pricing meaningful near-term yen and equity volatility around that BoJ event. On the commodity-currency side, AUD/USD slipped to 0.7218 despite iron ore holding near $100/t and copper rising 1.62% to $6.8485/lb, reflecting broader risk-off sentiment outweighing the commodity tailwind for Australian resource names. USD/CNY fell 0.19% to 6.6977, consistent with PBOC allowing modest yuan firmness as Beijing executes its bank recapitalization program; the Shanghai Composite's 0.20% gain against a sea of red regionally underscores China's policy-insulated posture for now.