- The geopolitical conflict between the US and Iran has escalated again, prompting financial markets to revert to risk-averse mode. Asian equity assets were generally under pressure on Thursday, with the MSCI Asia Pacific ex-Japan Index significantly dropping by 1.5%, Japan's Nikkei 225 Index closing down by 1.9%, and South Korea's stock market falling by as much as 2.6% after reopening.
- The ceasefire agreement between Israel and Lebanon, which led to a full withdrawal of Hezbollah, boosted the market, causing Brent crude oil futures to fall 1.3% from recent highs to $96.59 per barrel. However, the overall complexity of the Middle East situation continues to suppress market risk appetite.
- The sensitivity of the forex and digital asset markets surged, with the US dollar index strengthening to 99.44, dragging Bitcoin down sharply by 4% to a four-month low. Meanwhile, the Bank of Japan's hawkish policy shift pushed the yen up slightly to 159.88, temporarily moving away from the intervention warning line.
Asia-Pacific Equity Assets Under Pressure
Influenced by the broad weakness in Wall Street stocks overnight, with the S&P 500 Index down 0.7%, major stock indices in the Asia-Pacific region fell across the board on Thursday. Market traders chose to ignore the better-than-expected US ISM Services PMI data. The data showed an increase in US service sector activity in May, mainly due to businesses preemptively ordering to replenish inventories to guard against supply chain shortages caused by Middle East conflicts. Westpac analysts pointed out that renewed US-Iran clashes prompted funds to accelerate into defensive assets, with E-mini S&P 500 futures continuing to fall by 0.5% in the Asia-Pacific session, reflecting that macro sentiment remains highly sensitive in the short term.
Middle East Geopolitical Situation Constrains Oil Supply Expectations
Although Brent crude oil futures prices have slightly retreated, uncertainty on the supply side in the Middle East has not been completely eliminated. The ceasefire agreement between Lebanon and Israel, which requires Hezbollah to withdraw south of the Litani River, is viewed cautiously by the market due to previous ceasefire attempts in April and May that were accompanied by ongoing violent conflicts. Meanwhile, although the US House of Representatives passed a resolution aimed at preventing military action with Iran, analysts believe the resolution is largely symbolic. Overcoming a potential presidential veto would still face a high legislative hurdle in future votes in both houses.
Hawkish Remarks from the Bank of Japan Support Yen Exchange Rate
In the forex market, the US dollar index, after three consecutive days of gains reaching its highest point since April, remained volatile around 99.44. The yen appreciated slightly by 0.1% against the dollar to 159.88, distancing itself from the widely recognized intervention psychological threshold of 160. Bank of Japan Governor Kazuo Ueda stated that if inflation risks outweigh economic downside risks, the central bank must thoroughly discuss the pros and cons of raising interest rates at the upcoming meeting. This statement reinforced market expectations for a rate hike this month. Additionally, benefiting from a rebound in resource exports offsetting a surge in fuel imports, Australia's trade surplus reappeared in April, boosting the Australian dollar by 0.1% against the US dollar.
Tech Giants' Earnings and Cryptocurrency Double Pullback
The withdrawal of safe-haven funds was particularly evident in the technology sector and digital assets. Chip giant Broadcom's second-quarter revenue failed to meet Wall Street analysts' expectations, and with executives maintaining their 2027 sales forecast unchanged, it suggested that its core growth momentum might be slowing, leading to a significant drop of over 13% in its stock price in after-hours trading. In the digital currency market, cryptocurrencies faced concentrated selling, with Bitcoin experiencing a cumulative decline of 17% after five consecutive days of losses, hitting a four-month low of $62,321.87 during the session. Analysts pointed out that the strengthening US dollar, the 10-year US Treasury yield rising to 4.473%, and a significant contraction in market risk appetite collectively created multiple pressures on risk assets in the short term.
