Asia Stocks Rebound as Oil Slides on US-Iran Pause in Hostilities

Here’s your quick read to start the day: a chatty, no-fuss look at overnight moves, the big story, what’s on the docket, and the tickers you need to watch.

Kagenmi

istock.com

By Nandinee Keluskar

July 27, 2026 at 2:20 AM IST

Global Mood: Cautiously Risk- on
Drivers: US-Iran Strikes Paused, Tariff Wall Hardens

Asia-Pacific markets opened higher on Monday as investors embraced a risk-on mood after a sharp fall in oil prices eased concerns over inflation and global growth. Equities across Australia, Japan and South Korea advanced after Brent crude dropped more than 5% following Iran's indication that it would suspend attacks as long as the US maintained its pause in military operations. The decline in oil prices helped reverse some of the risk aversion that had dominated markets amid fears of prolonged disruptions to global energy supplies.

However, investor optimism remained measured as geopolitical uncertainties persisted. While the absence of fresh US-Iran strikes signalled tentative de-escalation, officials on both sides stressed that the pause remained conditional and could quickly unravel. Continued Houthi attacks on Saudi energy infrastructure and Ukraine's strike on an Iranian commercial vessel underscored broader regional risks. Meanwhile, investors also monitored the expansion of US tariff measures, which could weigh on global trade. Although lower oil prices improved market sentiment, geopolitical and policy uncertainties continued to limit confidence in a sustained recovery.

THE BIG STORY
A fragile calm descended on the Gulf Sunday after the Pentagon abruptly suspended its 13-night bombing campaign late Friday, with neither side exchanging strikes for two consecutive days. A senior Iranian official told Reuters Tehran would maintain its own halt as long as the US pause holds, conveying an "attack for attack" position that has effectively created an informal de-escalation without a formal framework. US Ambassador Waltz confirmed Trump paused to give diplomacy room, though the Iranian source cautioned there was "more scepticism than optimism" in Tehran over the latest opening. The Houthis continued firing on Saudi Red Sea oil targets Saturday, complicating any broader ceasefire picture and keeping energy markets on edge even as the immediate intensity of the Gulf exchange eased.

On the Ukraine front, Kyiv and Washington have discussed proposing an air ceasefire to Russia as part of a renewed peace push, with Zelenskiy due to meet Trump in Washington Tuesday. The Kremlin called it premature to comment but acknowledged dialogue channels with US negotiators remain open, and said its response would depend on whether any proposal aligns with Moscow's interests, a formulation that stops well short of engagement. Meanwhile, Trump's tariff agenda is entering a more durable phase, with the new 10-12.5% forced-labour duties on 60 countries now in effect and further actions covering excess industrial capacity, Vietnamese IP theft, and strategic industries from semiconductors to robotics set to follow in the weeks ahead, building what analysts describe as a legally sturdier and more permanent tariff wall.

Data Spotlight
US new home sales rose 1.6% month-on-month in June to 628,000 units, the first gain in three months and above forecasts of 610,000, supported by continued builder discounting and incentives. Sales rose across the South, Northeast and Midwest but fell 22.4% in the West. The median sales price dropped to $398,300 from $412,000 in May, while supply edged down to 9.3 months.

The S&P Global US Composite PMI rose to 53.6 in July from 51.9 in June, an eight-month high, driven by an acceleration in services activity. Hiring turned positive for the first time in three months and business confidence hit an eight-month high, though supply chain pressures intensified to the greatest extent in nearly four years amid the West Asia conflict. Input cost inflation hit a 14-month high and selling price inflation approached a four-year peak.

The S&P Global US Manufacturing PMI edged down to 53.8 in July from 53.9 in June, missing expectations of 54.3, as production growth slowed to its weakest since March and new orders expanded at the softest pace in four months. Factory employment rose and supplier delivery times lengthened, though delays reflected West Asia supply disruptions rather than demand strength.

Takeaway: US activity accelerated in July, with the composite PMI hitting an eight-month high, though World Cup and anniversary-related spending may have flattered the services reading. Intensifying supply chain pressures and surging input costs tied to the West Asia conflict pose a growing inflation risk, complicating the Federal Reserve's path forward.

WHAT HAPPENED OVERNIGHT

US stocks end mixed as AI spending fears weigh on tech while oil pullback offers relief

The Dow rose 0.46%, S&P 500 edged up 0.05%, and Nasdaq fell 0.64%, with the S&P 500 tech sector down 0.88% as chip stocks led losses for a second straight week.
For the week, the Dow fell 0.4% for its third straight weekly loss, while the S&P 500 dropped 0.6% and Nasdaq lost 2% for a second consecutive weekly decline.
Intel sank 7.9% despite forecasting above-estimate profit and revenue, dragging the Philadelphia Semiconductor Index down 4.5%, as Alphabet's massive capex hike continued to weigh on AI sentiment.
Investors increasingly worry that AI capital outlays are outpacing returns, with FOMO giving way to fears of massive overbuilding ahead of results from Microsoft, Amazon, Meta, and Apple next week.
The Trump administration imposed new tariffs of 10%-12.5% on goods from 60 trading partners citing forced-labour enforcement concerns, as a temporary 10% global tariff expired.

US Treasury yields ease slightly after four-session rally to January 2025 highs

The 10-year yield dipped to 4.67%, pausing after climbing to its highest since January 2025, as a pullback in oil prices offered modest relief.
West Asia tensions remained elevated, with Trump saying he would soon decide whether to launch a "massive attack" on Iran, keeping the inflation risk premium intact.
Flash PMIs showed US services activity strengthened in July while manufacturing growth slowed and price pressures intensified.
Markets price a 35% chance of a Fed hike next week and 80% odds of a September move, with the policy decision the key focus for the week ahead.

Dollar pauses near one-month high as oil pullback softens near-term rate hike bets

The dollar index held at 101.3, just 0.3% below the 15-month high touched in late June, as a slight energy price pullback eased but did not reverse growing Fed hike expectations.
Energy inflation concerns remain elevated following tanker blockades in the Persian Gulf and Red Sea, with oil and fuel prices well above pre-escalation levels.
PMI data showed private sector activity grew at its fastest pace this year, while initial jobless claims posted their biggest weekly drop in nearly six decades, reinforcing the robust labour market backdrop.

Oil falls over 4% but posts hefty weekly gains as China pushes to revive US-Iran peace talks

Brent settled at $96.78/bbl, down 3.88%, and WTI at $89.31, down 3.12%, with weekly gains of 10% and 8% respectively after Brent crossed $100 for the first time since May on Thursday.
China initiated a push to resume stalled US-Iran peace talks, prompting sharp profit-taking, though analysts cautioned tight supply conditions could reverse quickly.
Strait of Hormuz daily vessel transits held steady at just three for a third consecutive day, while Bab el-Mandeb crossings totalled 32 on July 23, with ships still moving but flows far below normal.
Trump vowed "major military punishment" for Iran and its Houthi allies following attacks on two Saudi oil tankers in the Red Sea.
JPMorgan estimated each additional month of supply disruption would add $7-8/bbl to Brent, lifting monthly average prices to $114/bbl if disruptions extend to three months.
Kazakhstan temporarily cut oil production after suspected Ukrainian drone attacks forced its main Black Sea export terminal to close, while Russia struck three Ukrainian ports targeting fuel infrastructure overnight.

Day’s Ledger*

Economic Data

German July Ifo Business Climate Index
US June Durable Goods Orders Data

Corporate Actions

Earnings: Andhra Cements, Canara Bank, Coal India, Housing & Urban Development Corporation, Tata Chemicals, Tata Power Company,

Tickers to Watch

NTPC: Board approves NCDs worth up to 120 billion rupees in 12 tranches; commissions 64.76 MW of Khavda Solar project, taking group capacity to 91,030 MW.
BANK OF BARODA: Adds US$1 billion Green & ESG Bond sub-limit under MTN programme; raises overseas borrowing limit to US$10 billion from US$5 billion.
HDFC BANK to redeem US$1 billion 3.7% AT1 bonds on August 25, 2026, after exercising call option.
MARUTI SUZUKI: Launches new Brezza Turbo Boosterjet.
NBCC: Secures two PMC orders worth 1.0885 billion rupees for hostels in Odisha and a lab/office building at ICAR-CITH, Srinagar.
INDO TECH TRANSFORMERS: Gets NTPC approval for 2x90 MVA, 400 kV transformer order for BESS projects.
IDFC FIRST BANK: Board approves raising up to 200 billion rupees via equity/debt; fixes August 7, 2026 as FY26 dividend record date.

Must Read

(*Compiled from various media sources)

See you tomorrow with another edition of The Morning Edge.

Have a great trading day

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