Risk sentiment shifted materially overnight as renewed US-Iran diplomatic engagement drove a sharp unwind in geopolitical risk premium, pulling Brent crude down sharply to around $104/bbl and WTI to approximately $97/bbl — a move of 7-10% that rippled across asset classes. Central banks remained in focus, with the RBA delivering a 25 basis point hike to 4.85% in a split 6-3 vote citing persistent domestic inflation, while the Fed, ECB, and BoE each held rates but signalled December hikes remain live options as energy-driven inflation pressures persist. Gold rebounded approximately 1.8% as oil eased, the VIX pulled back 1.5% to 20.83, and US Treasuries saw a modest bull-steepening with the 10-year yield falling 3bp to 4.91% even as the 2-year nudged 3bp higher to 4.59%. US midterm elections, scheduled for November 4 local time, are adding a layer of uncertainty around fiscal and regulatory outlook that markets are beginning to price.
For Asia-Pacific markets opening today, the oil-driven relief rally is a double-edged signal: lower energy costs ease inflationary pressure and support consumer and industrial names, but the sharp fall in energy equities — US Energy sector dropped 3.96% overnight — creates a direct headwind for ASX energy stocks including domestic producers. The RBA hike to 4.85% will keep the AUD under pressure alongside a broader USD bid, with AUD/USD already down 0.84% to 0.697, compressing the earnings translation benefit for Australian exporters. The ASX 200 closed up 0.34% in the prior session led by REITs (+2.85%) and Consumer Discretionary (+1.87%), but the overnight Wall Street mix — S&P 500 and Nasdaq lower, Dow marginally higher — alongside a stronger USD and weaker copper (-1.99%) and aluminium (-4.37%) point to a cautious open particularly for materials and tech-exposed names.