Renewed US military strikes against Iran ignited geopolitical risk concerns during the Asian trading session, sparking sharp market moves.
On July 8th, crude oil led the charge with a significant jump. Brent crude opened up 2.8%, while Asia-Pacific equities generally retreated. However, South Korean stocks staged a dramatic reversal to become the day's standout feature. Nasdaq 100 index futures initially dipped before turning higher by 0.4%.
Nick Twidale, Chief Market Analyst at AT Global Markets, commented, "The movements of AI and tech stocks have dominated the market over the past few weeks, but investors are now forced to refocus on geopolitical tensions. Should the situation escalate further in the coming trading sessions, geopolitical tensions are likely to dominate market sentiment."
V-Shaped Reversals in Japanese and Korean Stocks
The South Korean KOSPI was the most closely watched asset in Asia today. It opened nearly 3% lower, extending losses initially before rapidly paring the decline. It approached flat territory during the session and ultimately not only erased all losses but expanded its intraday gain to 0.9%, completing a sharp V-shaped reversal.
Citing sources familiar with the matter, Bloomberg reported that SK Hynix's $28 billion US listing project has already garnered subscriptions several times oversubscribed, with pricing set for Thursday. This provided additional support for sentiment in the South Korean semiconductor sector. South Korea also announced it will unveil a roadmap for the internationalization of the Korean Won by the end of July. This news may offer some support for the Won's trajectory and has also boosted market confidence to a degree.
Additionally, Japan's Topix index opened 1% lower, and the Nikkei 225 opened down nearly 1%, before gradually recovering during the session. They are currently down a modest 0.2%.
Regarding US index futures, the Nasdaq 100 futures are up 0.4%. US stocks closed lower on Tuesday, with the chip stock index falling over 4% for the day and the Nasdaq 100 declining 1.8%.
Crude Oil: Strait of Hormuz Risk Premium Reignites
New US airstrikes against Iran caused a sudden cooling of market risk appetite.
Brent crude oil rose as much as 2.8% during the session, breaking above $76 per barrel, while US WTI crude gained 2.9% to $72.50 per barrel. Gains have since moderated slightly, with Brent crude currently up 1.8%.
This follows US airstrikes against Iran and the revocation of a waiver that had allowed its global oil sales, actions taken after Iranian vessels reportedly attacked ships in the Strait of Hormuz multiple times. On July 8th, according to reports, the US Treasury Department's Office of Foreign Assets Control (OFAC) announced the revocation of a general license authorizing Iranian oil sales. Related wind-down transactions will be permitted until 12:00 AM US Eastern Time on July 17th.
Following reports from Iranian media of explosions in multiple locations across Iran, the US Central Command stated that US forces have begun a series of powerful strikes against Iran in response to Iranian attacks on commercial vessels in the Strait, accusing Iran of a clear violation of the ceasefire agreement.
Spot Gold Slightly Lower, US Dollar Index Largely Unchanged
In other asset classes, spot gold edged down 0.1% to $4,101.62 per ounce, hovering around the $4,100 level overall.
The US Dollar Index was largely flat. The Japanese Yen weakened slightly, down 0.1% to 162.34 Yen per US Dollar. Offshore Chinese Yuan was largely stable at 6.8043.
In bond markets, the yield on the US 10-year Treasury note was essentially unchanged at 4.56%. Japan's 10-year government bond yield rose 1 basis point to 2.855%. Australia's 10-year bond yield climbed 5 basis points to 4.87%.
In cryptocurrencies, Bitcoin fell 0.3% to $63,464.63, while Ethereum declined 0.5% to $1,773.87.
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