Asia Markets Mixed as Oil Surge, Hormuz Uncertainty Keep Risk Appetite Cautious

Global Mood: Cautiously Risk-on
Drivers: Hormuz Deal Collapses on Reparations

Asian markets were mixed on Tuesday as a sharp rise in oil prices and renewed uncertainty over a US-Iran deal kept investors cautious, while a rotation from AI stocks into banks provided some support. South Korea’s Kospi fell 1.09%, while Hang Seng futures gained 0.55%; Japan remained closed for a holiday. Brent crude hovered near $87.70 a barrel after rising about 10% over four sessions, pushing the US 10-year Treasury yield higher and adding to inflation concerns.

The outlook for reopening the Strait of Hormuz also deteriorated after disagreements over compensation complicated negotiations between Washington and Tehran. Meanwhile, the yen remained under pressure near 159.17 per dollar, reviving intervention concerns. Asian bank stocks rallied as investors sought dividend-paying, domestically oriented sectors amid volatility in technology shares. Geopolitical risks also remained elevated as Ukraine intensified strikes on Russian energy infrastructure, while Russia continued attacks on Ukrainian cities.

THE BIG STORY
Hopes for a swift Hormuz deal effectively collapsed Monday as Trump countered Iran's compensation demands with his own — calling on Tehran to pay for deaths over 50 years including, erroneously, victims of the 2000 USS Cole bombing attributed to al Qaeda. Oil prices settled 5% higher as the counter-demand dimmed deal prospects. Iran's foreign ministry said Oman talks were progressing, with a shipping route map agreed and technical issues remaining, but the mutual compensation standoff has added a new and potentially irresolvable layer to negotiations that were already conditional on sanctions relief, blockade removal and an end to military threats. Trump is simultaneously under mounting domestic pressure, high fuel prices are eroding support in rural areas that backed him, and Democrats are framing any eventual deal as a capitulation after months of failed military pressure.

Ukraine struck Tatneft's TANECO refinery in Tatarstan, about 800km east of Moscow, killing at least 13 people including a child and seven Uzbek nationals, in one of the heaviest civilian tolls from a Ukrainian strike inside Russia in months. Russia opened a criminal terrorism investigation and accused Kyiv of deliberately targeting civilians, while Ukraine maintained the strike was aimed at oil infrastructure as part of its campaign to raise the cost of the war inside Russia. Russian forces simultaneously struck Zaporizhzhia and Kyiv overnight, killing five and injuring 20 in Zaporizhzhia and triggering warehouse fires in the capital. The mutual escalation of deep-strike campaigns on civilian-adjacent infrastructure, refineries, ports, and power facilities marks a grimmer and more indiscriminate phase of the war on both fronts.

Data Spotlight
Singapore's Q2 2026 GDP growth was revised up to 5.9% year-on-year from an advance estimate of 5.7%, driven by manufacturing growth accelerating to 12.5% on robust AI-related demand for electronics and precision engineering. Quarterly GDP grew 1.4%, bringing first-half growth to 6.1%, prompting the government to upgrade its 2026 full-year growth forecast to 4.5%–5.5% from 2%–4%.

UK retail sales rose just 1% year-on-year in July on a like-for-like basis, a five-month low and below expectations of 1.5%, as consumers remained cautious despite support from England's World Cup run and a summer heatwave. Food sales gained 3.8% while non-food sales declined 0.7%, though Barclays' broader consumer confidence measure reached its most optimistic level in 21 months.

Takeaway: Singapore's upward GDP revision and upgraded growth forecast underscore the outsized role of AI-driven manufacturing demand in powering Asia's export economies. UK consumer activity, while showing tentative confidence improvements, remains subdued at the headline level, reflecting ongoing cost-of-living caution among households.

WHAT HAPPENED OVERNIGHT

US stocks edge lower as Hormuz deal hopes fade and oil jumps 5%

• The S&P 500 fell 0.06%, Nasdaq dropped 0.32%, and the Dow slipped 0.11%, as fading optimism over a Hormuz deal and surging oil prices dampened risk appetite.
• Trump demanded Iran pay compensation for deaths he attributed to it, while Iran called for US concessions including war damage recompense, with both sides trading conditions that pushed deal prospects further away.
• US crude jumped 5% to settle at $82.13/bbl on the dimming Hormuz outlook, keeping energy-driven inflation concerns and rate hike expectations elevated.
• Intel fell 4.1% after announcing a $15 billion share sale, while Nvidia dropped 2.9% despite reports that Apollo, Blackstone, and others are working with Nvidia on a $500 billion AI infrastructure financing package.
• September Fed hike odds ticked back up to 52% after last week's soft payrolls data had pushed them to 44%, with CPI and PPI data due later this week as the next key policy inputs.

US Treasury yields rise to monthly highs as oil surge revives inflation concerns

• The 10-year yield climbed to 4.70%, its highest so far this month, as a 5% jump in crude prices on fading Hormuz deal prospects rekindled fears of renewed inflationary pressure.
• Despite last week's weak jobs report pushing September hike odds to 44%, yields rose as markets weighed the inflation implications of sustained high energy prices against the softer labour market backdrop.
• September hike odds stand at 46%, with rates seen unchanged at 54%, as this week's CPI and PPI reports are the next key inputs for the Fed's policy path.

US Dollar edges up to 99.7 after last week's slide to two-month lows, with CPI data in focus

• The greenback recovered modestly following a 0.4% weekly decline, with September Fed hike odds at 46% down from 64% a week ago after Friday's weak jobs report.
• Traders continued to assess Hormuz deal developments, with a US-Iran agreement appearing increasingly unlikely near-term, keeping energy inflation risks in play.
• The dollar was mostly higher against the yen, which gave back some of its intervention-driven gains while remaining well above last month's multi-decade low.

Oil surges 5% as mutual compensation demands between US and Iran dim Hormuz deal prospects

• Brent settled at $87.72/bbl, up 4.99%, and WTI at $82.13, up 5.05%, reversing a portion of last week's 7%-plus decline as deal optimism evaporated into mutual recriminations.
• Iran said the US must lift sanctions, pay compensation, and end military threats before Hormuz reopens, while Trump demanded Iran compensate for "all the people they have killed and gravely wounded."
• Iran said it is nearing a final pact with Oman on new Hormuz shipping lanes but confirmed no talks with the US are currently underway, with Tehran saying Washington remains in breach of the June interim deal.
• Houthis struck Saudi Aramco's Jazan refinery for a second time in recent weeks, forcing postponement of its 400,000 bpd restart to August 30, while ADNOC said 15 of its vessels have been attacked transiting the Strait of Hormuz since the conflict began.
• Saudi Arabia, Turkey, and Pakistan signed a joint defence pact in response to growing regional instability from the US-Israeli war with Iran.
• US SPR stocks fell 6.1 million barrels to 298.7 million barrels, the lowest level since January 1983, as drawdowns continued under the government's emergency release programme.
• Ukrainian strikes hit the Taneco refinery in Tatarstan and the ZapSibNeftekhim petrochemical plant in Tyumen, adding further pressure on Russian energy supply.

Day’s Ledger*
 Economic Data

• US July Existing Home Sales

Corporate Actions

• Earnings: Ashoka Buildcon, Balrampur Chini Mills, Bata India, Finolex Cables, MRF, Rail Vikas Nigam

Policy

• Reserve Bank of Australia Interest Rate Decision
• RBI Governor to speak at FIBAC event 

Tickers to Watch

• VODAFONE IDEA: April-June net loss at 37.54 billion rupees vs profit of 519.7 billion rupees in January-March 2026 (skewed by a 574.91 billion rupee exceptional gain); reported a 16.11 billion rupee exceptional gain in the June quarter.
• WIPRO: To be replaced by BSE in the Nifty 50 index effective September 30, ending its near-uninterrupted presence since the index's inception.
• BOSCH: April-June consolidated PAT down 36.8% YoY to 7.05 billion rupees from 11.15 billion rupees.
• KEC INTERNATIONAL: April-June net profit down 41.7% YoY to 726 million rupees; revenue flat at 50.24 billion rupees; EBITDA down 16.9% to 2.908 billion rupees, margin narrows to 6% from 7%.
• HCLTECH: Clarifies media reports on hacker group's claim of limited employee data exposure; initial probe finds data may be limited and dated, with no evidence of system breach or client engagement; investigation ongoing.
• LUPIN: Receives USFDA approval for ANDA of Sodium Zirconium Cyclosilicate for Oral Suspension in 5g and 10g packet strengths.
• BOMBAY DYEING & MFG COMPANY: April-June profit down 48.7% YoY to 70.8 million rupees from 138.1 million rupees; revenue up 8.7% to 4.108 billion rupees; EBITDA loss narrows sharply.
• ZEN TECHNOLOGIES: Receives order worth 2.95 billion rupees (incl. GST) from Ministry of Defence for supply of simulators.
• JSW ENERGY: Adds 1,166 MW renewable capacity since April 2026, surpassing 94% of FY26's total organic capacity addition; total installed capacity now at 14,920 MW following completion of Maruti Clean Coal and Power acquisition. 

Must Read

• The World Economy Is Swerving, and the Destination Is Unknown
• The Mecca Pact’s Nuclear Shadow
• A Monetarist Renaissance?
• Indian Banking Needs Better Governance, Not Simply More Regulation
• FCNR Liquidity Boost May Prove Transitory

(*Compiled from various media sources)

See you tomorrow with another edition of The Morning Edge.

Have a great trading day