The dominant macro driver overnight was the sharp surge in crude oil — Brent rose 6.92% to $108.21/bbl and WTI gained 7.17% to $102.94/bbl — as escalating US-Iran conflict, including tanker strikes, reignited supply-shock fears not seen since 2022. That price move landed simultaneously with the ECB's 25bp rate hike to a 2.50% deposit facility rate and updated forecasts showing eurozone headline inflation at 3.0% for 2026, while US 10-year Treasury yields pushed to 4.83% — up 3bp on the session and near multi-year highs — with the 30-year at 5.28%. Markets are now pricing a 50–70% probability of a Fed hike at the September 15–16 FOMC meeting, a level of tightening expectation that reflects how completely the oil shock has reset the inflation narrative heading into today's US CPI print. The VIX spiked 8.38% to 17.84, confirming that equity markets are repricing risk rather than looking through the move.
For Asia-Pacific investors, the cross-asset implications are concentrated across three axes. First, the JPY at 154.42 — up 0.55% against the dollar — reflects a genuine policy signal rather than safe-haven flows alone: hawkish BoJ commentary from board member Masu around rapid normalization has markets pricing a hike around September 18, and the TOPIX Banks sector fell 1.40% even as steel and energy resources surged 5.20% and 3.68% respectively, suggesting the market is sorting winners from losers within the BoJ normalisation trade rather than treating it as uniformly positive. Second, the AUD fell 0.87% to 0.7158 against the dollar — a notable move given that energy and materials are Australia's key export earners — indicating that higher global rates and demand-destruction fears are overwhelming the commodity price tailwind for the currency. Third, the CNY strengthened modestly (USD/CNY down 0.13% to 6.702) as China's subdued inflation — August CPI around 0.8% y/y — keeps the PBOC in a structurally different posture from its G10 peers, with the SSE Composite the only major index to close higher on Thursday, up 0.28%.