The dominant macro driver remains the three-month-old US-Israel-Iran conflict, which continues to disrupt Strait of Hormuz oil flows, push Brent crude toward $92–96 per barrel, and re-accelerate headline inflation globally. The imminent transition at the Federal Reserve — with Kevin Warsh set to replace Jerome Powell as chair — adds a layer of policy uncertainty, as treasury markets are already pricing a 2026 rate hike under Warsh even as White House economist Kevin Hassett suggests an Iran resolution could open the door to cuts. US April PCE came in at 3.8% year-on-year (core 3.3%, the hottest since November 2023), yet Wall Street shrugged off the print to post fresh record highs on the S&P 500 and Nasdaq, reflecting a widening disconnect between financial markets and underlying economic conditions. The VIX falling to 15.74 signals near-term complacency, but the fragility beneath the surface is real.
For Asia-Pacific markets, the cross-asset picture is mixed but broadly cautious. Gold's 1.73% overnight surge to $4,524 per ounce and copper's 1.82% gain signal that hard-asset and materials plays retain momentum, while the sharp 12.68% collapse in aluminium prices is a significant headwind for smelter-exposed ASX names. The AUD strengthened 0.46% to 0.7166 against the USD — a mild tailwind for unhedged exporters — but the RBA's hawkish tilt, with the cash rate at 4.35% and markets pricing a peak of 4.7%, keeps pressure on rate-sensitive ASX sectors. Chinese equities (SSE down 1.25%, Hang Seng down 1.06%) reflect ongoing demand-side softness in Beijing and geopolitical sensitivity, limiting upside for ASX bulk commodity exporters despite resilient iron ore at $109.27 per tonne.