Asian Markets Extend Gains as Hopes of Hormuz Deal Lift Sentiment

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By Nandinee Keluskar

August 7, 2026 at 2:19 AM IST

Global Mood: Cautiously Risk-on
Drivers: Trump Stuck in Iran Bind, Houthis Escalate, Russia's Civilian Safari Strikes

Asia-Pacific markets opened mostly higher on Friday as investors adopted a cautiously risk-on stance, encouraged by growing optimism that negotiations to reopen the Strait of Hormuz could ease disruptions to global energy supplies and reduce inflationary pressures. Gains across South Korea and Japan were supported by continued strength in technology and semiconductor stocks, while upbeat corporate earnings in the US reinforced confidence in the resilience of AI-driven investment and broader economic growth.

However, geopolitical risks continued to temper investor enthusiasm. Markets remained focused on diplomatic efforts between the US, Iran and regional mediators after reports suggested progress towards a framework for restoring shipping through the Strait of Hormuz. At the same time, Iran's warnings of retaliation against Gulf energy infrastructure and continued attacks by Iran-backed groups underscored the fragility of any potential agreement. Investors also monitored renewed security cooperation among regional powers and the ongoing conflict in Ukraine. While easing oil prices improved market sentiment, lingering geopolitical uncertainty continued to limit the scope for a broader risk rally.

THE BIG STORY
Trump faces a narrowing set of unattractive options in the Iran war as it enters its sixth month with no exit visible. An emerging Iran-Oman Hormuz deal would effectively formalise Iranian control over inbound strait traffic, a concession the administration had vowed never to grant and one that would represent a significant shift in regional power in Tehran's favour. The alternative, fresh large-scale strikes, carries mounting political risk ahead of November midterms, while the US has already depleted virtually all its precision long-range missile stocks. A third path, maintaining the blockade and status quo, offers no face-saving resolution. Iran is meanwhile pressing its advantage by warning Gulf states that any new US strike would trigger attacks on their energy infrastructure, a threat delivered through Araqchi's calls with Saudi, Qatari and Turkish counterparts that has visibly influenced Riyadh's posture, with the crown prince urging Trump to pursue diplomacy.

On the ground, Saudi Arabia warned of imminent coordinated Houthi and Iranian-backed Iraqi militia attacks on civilian energy sites, ports and airports, even as Houthis wounded 11 civilians in Najran province and killed over 30 Yemeni government troops. Turkey, Saudi Arabia and Pakistan were due to sign a trilateral defence agreement Friday, a signal of deepening regional security cooperation as the threat landscape widens. In Ukraine, Russia's air campaign has taken a grimmer turn in Zaporizhzhia, where residents describe a new wave of FPV drone strikes deliberately targeting civilians in what Ukrainians have termed "safari" attacks, hunting people in streets and vehicles as Moscow's ground offensive stalls on the front lines.

Data Spotlight
The 30-year fixed mortgage rate rose to 6.69% as of August 8th, a fifth consecutive weekly increase and the highest since late July 2025, as the Iran conflict and the Fed's unchanged rate decision fuelled inflation concerns. Mortgage applications declined for the final two weeks of July, though Freddie Mac noted improving inventory and modestly lower listing prices as signs of gradual market adjustment.

US unit labour costs rose 1.3% in Q2 2026, matching Q1's pace but well below forecasts of 2.1%, as a 1.4% productivity gain offset higher hourly compensation. Manufacturing unit labour costs were unchanged as productivity and compensation gains offset each other. Annual nonfarm labour costs rose just 1.4%, pointing to contained wage-driven inflation pressures.

Initial jobless claims edged up 1,000 to 199,000 in the final week of July, remaining near the 57-year low hit two weeks prior and below expectations of 202,000. Continuing claims rose to 1,801,000 but remained well below this year's averages, consistent with FOMC assessments of a fully employed economy.

US employers announced just 33,429 job cuts in July, the fewest in two years and down 27% from June, even as AI remained the leading driver of cuts for a fifth straight month. Hiring announcements of 16,095 were the highest July total since 2022, with year-to-date hiring up 25% from a year earlier.

Takeaway: A near-historic low in layoffs, contained labour costs and resilient jobless claims paint a broadly healthy US labour market picture, even as rising mortgage rates and AI-driven workforce restructuring introduce pockets of uncertainty. The combination of low unit labour cost growth and improving productivity offers the Fed some comfort on the inflation front.

WHAT HAPPENED OVERNIGHT

US stocks edge lower as earnings fatigue and Iran headline weariness set in ahead of jobs report

The Dow fell 0.85%, S&P 500 lost 0.18%, and Nasdaq slipped 0.06%, pausing after record highs earlier in the week as investors showed signs of headline fatigue around Iran developments.
AppLovin plunged 19.7% after missing quarterly revenue estimates, while Datadog fell 19% on a weaker-than-expected July-September revenue growth outlook, both weighing heavily on the S&P 500.
April-June earnings season remains strong, with 84.8% of 382 reporting S&P 500 companies beating estimates, well above the historical 68% average beat rate.
Weekly jobless claims edged up slightly, with Friday's nonfarm payrolls report the key focus for shaping Fed rate expectations given Warsh's reduced forward guidance.

US Treasury yields rise to 4.67% as Warsh signals readiness to hike if inflation stays hot

The FT reported Warsh will stick with lean Fed messaging despite market backlash, but is prepared to raise rates in September if upcoming inflation readings prove hot.
September hike odds stand at 58%, down from 68% on Monday, with Friday's jobs report the next key input for market pricing.
ADP data showed private-sector hiring slowed sharply in July, though announced job cuts fell to a two-year low, painting a mixed labour market picture ahead of payrolls.
A lasting US-Iran agreement appears unlikely near-term, keeping energy price pressure alive and sustaining concerns that commodity costs could fuel further inflation.

US Dollar edges up to 99.8 but holds near seven-week low as Iran optimism meets jobs report caution

Iran said it reached an agreement with Oman on a proposed Hormuz shipping route, raising hopes of resumed energy flows, though a broader US-Iran deal remains uncertain with Trump saying he would "see what happens."
Attention has shifted to Friday's nonfarm payrolls report, with a strong reading likely to reinforce Fed hike expectations while a miss could prompt markets to scale back tightening bets.

Oil settles up over $3 as Iran parliament reviews bill to ban US and Israeli vessels from Hormuz

Brent settled at $82.49/bbl, up 3.83%, and WTI at $77.29, up 2.75%, after an Iranian parliamentary committee began reviewing a bill to bar US, Israeli, and other "hostile" vessels from the Strait of Hormuz, with fines of up to 20% of cargo value for violators.
Iran warned Gulf states that any new US attack on its territory would trigger strikes on critical energy infrastructure across the region, raising the stakes for Washington's closest regional allies.
Houthis carried out missile and drone attacks on Saudi deployments in Yemen's Marib and Hadramout, while also claiming missile attacks on two Saudi oil tankers off Yanbu and in the Gulf of Aden.
Gulf crude and condensate exports remained 40% below pre-war levels in July, with traders noting the longer Iran deal delays persist, the more prices will gravitate higher.
Saudi Arabia slightly lowered its Arab Light September OSP for Asia, reflecting the ongoing demand-side pressure from subdued regional and Chinese buying.
A major oil refinery in Russia's Yaroslavl region caught fire after a large Ukrainian drone attack, adding further pressure on global refined product supply.

Day’s Ledger*
Economic Data

German June Industrial Production
India weekly FX Reserves data
US July Unemployment Rate

Corporate Actions

Earnings: Godrej Consumer Products, Oil India, Power Finance Corporation, State Bank of India, Titan Company

Policy

US FOMC Member Barkin Speaks

Tickers to Watch

APOLLO TYRES: April-June consolidated net profit at 348.9 million rupees vs 12.9 million rupees a year earlier; revenue up 12.8% YoY to 73.978 billion rupees.
LIFE INSURANCE CORPORATION OF INDIA: April-June total APE at 136.92 billion rupees, up 8.2% YoY but below estimate of 148.41 billion rupees; VNB surges 61.3% YoY to 31.36 billion rupees, ahead of estimate of 26.38 billion rupees.
SIEMENS ENERGY INDIA: April-June net profit up 67.8% YoY to 441 million rupees, beating estimate of 342.8 million rupees; revenue up 39.3% to 2.486 billion rupees; EBITDA up 72.1% to 585.7 million rupees, also above estimates.
NCC: April-June consolidated net profit up 12.6% YoY to 216.4 million rupees; revenue up 12.2% to 5.812 billion rupees; EBITDA up 19.5% to 545 million rupees, margin expands to 9.38% from 8.81%.
BRITANNIA INDUSTRIES: April-June consolidated net profit up 13.6% YoY to 591.4 million rupees from 520.1 million rupees.
KIRLOSKAR OIL ENGINES: April-June net profit down to 114 million rupees from 142 million rupees; revenue up 13.5% YoY to 2 billion rupees.
TVS MOTOR COMPANY: Expands global EV footprint, launching TVS iQube in Kenya, becoming first Indian two-wheeler OEM to introduce a premium electric scooter in Africa.
SHIPPING CORPORATION OF INDIA: April-June net profit at 619 million rupees vs 354 million rupees a year earlier; revenue up 40% YoY to 1.847 billion rupees.
HINDUSTAN CONSTRUCTION COMPANY: April-June consolidated net profit up 0.69% YoY to 51.08 million rupees from 50.73 million rupees.
CROMPTON GREAVES CONSUMER ELECTRICALS: April-June consolidated net profit up 14.8% YoY to 141 million rupees; revenue up 11.8% to 2.235 billion rupees.
FINOLEX INDUSTRIES: April-June net profit up 16.7% YoY to 114.5 million rupees from 98.2 million rupees.
LLOYDS ENGINEERING WORKS: April-June profit attributable to owners up 111.96% YoY to 63.97 million rupees from 30.18 million rupees; revenue surges 142.9% to 527.15 million rupees.

Must Read

(*Compiled from various media sources)

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