Geopolitical risk drove overnight sentiment after Iran-backed Houthi militants struck Riyadh's international airport over the weekend, killing at least 12 and injuring over 300, lifting Brent crude 1.26% to USD 106.04 a barrel despite President Trump's announcement of a Russia-Ukraine energy ceasefire — a deal markets received with scepticism as Ukrainian officials reported violations. Central banks across the G10 remain in tightening mode, with the Fed's target upper bound at 4.0%, the RBA at 4.60%, the ECB deposit rate at 2.50%, and the BoJ at 1.25%, keeping the higher-for-longer rates narrative firmly intact. US Treasuries rallied modestly on the bond-market holiday, pulling the 10-year yield down 6 basis points to 5.22%, while the VIX ticked up 2.49% to 15.21, reflecting a measured but genuine rise in caution. Sector rotation into energy, consumer staples, and communication services at the expense of technology underscored the defensive tilt that is increasingly characterising this phase of the cycle.
For Asia-Pacific markets opening today, the combination of elevated oil prices, sticky inflation expectations, and hawkish central banks presents a mixed but manageable backdrop. The ASX 200 closed Monday at 8,783.2, up 0.76%, led by financials (+1.56%) and materials (+1.52%), with miners BHP, Rio Tinto, and Fortescue posting strong sessions on iron ore, copper, and gold support. However, lithium names face renewed pressure after lithium carbonate prices fell 5.68% and spodumene SC6 dropped 5.83%, a headwind for ASX-listed producers. Investors should note that FOMC meeting minutes released at 05:00 AEST this morning and US bank earnings beginning today — JPMorgan, Goldman Sachs, Wells Fargo, and Citigroup — will set the tone for risk appetite heading into the Australian afternoon session.