The dominant macro driver heading into Monday's open is the escalating US-Iran conflict, which drove Brent crude to a four-month high near $110 per barrel before a partial retreat to around $104–105, stoking inflation fears across developed markets and accelerating rate hike expectations at the Fed, ECB, BoJ, and RBA. JPMorgan now sees eight of nine major DM central banks hiking by year-end, with the ECB having already delivered a 25bp hike to 2.5% on Thursday, while Friday's firmer-than-expected US August core CPI print of +0.29% month-on-month lifted Fed hike odds for the September 16–17 FOMC meeting to approximately 90%. US Treasuries reflected this repricing sharply, with the 2-year yield rising 13 basis points to 4.56% and the 10-year adding 12 basis points to 4.95%, signalling a materially tighter financial conditions backdrop. The VIX fell 11.2% to 15.84 as Wall Street equities staged a relief rally into Friday's close, though the weekly picture remained one of net losses driven by the oil and rates shock.
For Asia-Pacific markets opening this Monday, the cross-asset picture is unambiguously complex: higher oil is a stagflationary tax on import-dependent economies like Japan and South Korea, which saw the Nikkei and KOSPI fall 1.9% and 1.76% respectively on Friday, while the BoJ is now pricing approximately 1.25% by its September 17–18 meeting on the back of hot August PPI data. China's Shanghai Composite fell 1.18% and the Hang Seng slipped 0.60%, though a reported approximately $54 billion injection into state banks and insurers provided some support and pushed iron ore futures above $100 per tonne for the first time since early July, which is directly constructive for ASX iron ore majors. The ASX 200 fell 0.89% on Friday to 8,741.2 with the ASX VIX rising 9.28% to 14.36, flagging a mild uplift in local risk aversion, though Australian financials outperformed strongly and the AUD held above $0.716, offering some stability for resources exporters heading into a week dominated by tonight's US CPI release.