Renewed US-Iran military clashes drove the dominant overnight narrative, with US airstrikes on Iran prompting retaliatory responses and pushing Brent crude above $95 per barrel to settle around $95.35, stoking fresh inflation fears and triggering a broad global bond sell-off that lifted the US 10-year Treasury yield to approximately 4.79%, its highest level in some years. Central banks are firmly back in tightening mode: the RBNZ delivered an expected 25bp hike to 2.75%, September ECB and BoJ hikes are widely priced, and RBA September hike odds have risen to around 50% or above, making the coming weeks a defining period for global monetary policy. Risk sentiment turned decisively cautious through the Asian and European sessions, with higher oil and yields weighing on equities globally while selectively supporting energy producers, defensives, and safe-haven assets including gold, which rose nearly 2% to $4,433 per ounce. The VIX eased sharply by nearly 7% to 15.2, suggesting Wall Street itself recovered composure late in the session, but elevated yields and geopolitical uncertainty leave the macro backdrop fragile heading into Thursday's Asia open.
For Asia-Pacific markets, the cross-asset signal is mixed but tilted cautious: while Wall Street snapped a three-day losing streak with the S&P 500 up 0.46% and the Dow gaining 295 points, the bond market is still absorbing significant supply and oil-driven inflation pricing, with the 30-year US yield rising to 5.27%. The AUD strengthened 0.35% to 0.7172, a modest tailwind for AUD-denominated returns but a headwind for exporters, while surging iron ore (+3.41% to $99.33/t) and copper (+1.51% to $6.605/lb) provide a direct positive read-through for ASX materials heavyweights. The ASX VIX sits at a subdued 10.49, down 2.33%, pointing to contained local implied volatility even as the overnight geopolitical backdrop remains elevated, and investors will need to weigh the commodity tailwind against the pressure of rising domestic rate expectations on rate-sensitive sectors such as REITs, technology, and consumer discretionary.