Asian Markets Slide as Oil Surge Deepens Risk-Off Mood

GLOBAL MOOD: Extreme Risk Off
Drivers: Trump claims Iran leadership role, Oil surges to multi-year highs

Asian equity markets opened sharply lower on Friday, reflecting a clear risk-off mood as the escalating US-Iran conflict pushed energy prices higher and rattled global sentiment. Stocks across the Asia-Pacific region tracked overnight losses on Wall Street, where major indices fell as investors reacted to surging crude prices and growing fears of a wider regional war.

The brief relief rally earlier in the week has largely faded as the conflict entered its sixth day with no signs of a ceasefire. Oil markets remain at the centre of investor concern, with Brent crude climbing above $85 a barrel and US benchmark WTI surging past $81 amid disruptions to supply routes and the ongoing paralysis of the Strait of Hormuz.

Geopolitical risks intensified further after Israel issued evacuation warnings in Beirut ahead of a potential offensive against Hezbollah, while tensions widened to include Lebanon and Turkey. Rising oil prices, stronger US economic data and fading hopes of Federal Reserve rate cuts have also pushed US Treasury yields higher, reinforcing the cautious tone across global markets.

TODAY’S WATCHLIST
 - Eurozone GDP Data
 - US Unemployment Data
 - ECB President Lagarde Speech

THE BIG STORY
On Thursday, President Trump claimed the right to help choose Iran's next supreme leader and urged Iranian Kurdish forces to act, broadening US war goals beyond nuclear disarmament. Trump said Mojtaba Khamenei, the late supreme leader's hardliner son and succession frontrunner, was an "unlikely choice," and confirmed the administration has been in contact with Iranian Kurdish groups since strikes began. He stopped short of committing to air cover for any Kurdish offensive, leaving the extent of US support deliberately ambiguous. On the economic front, Trump brushed aside concerns about rising fuel prices, saying the military operation was his priority and that prices would "drop very rapidly when this is over", a striking reversal from a president who made low energy prices a central campaign promise.

Trump confirmed Iran was reaching out for negotiations, noting talks were "a little bit late" and further steps to ease oil market pressure were coming. The conflict expanded in Lebanon, with Israel urging evacuations in Beirut's southern suburbs and issuing warnings of imminent escalation against Hezbollah. Evacuation maps covered four districts, signaling intensified military action. Kurdish forces mobilized in Iran, Beirut faced new attacks, and backchannel negotiations began, indicating the conflict is spreading even as negotiation efforts start.

Data Spotlight
Initial jobless claims held steady at 213,000 in the last week of February, slightly below the 215,000 forecast and firmly under two-year averages. While continuing claims rose to 46,000 to 1,868,000, marginally above expectations. Federal employee claims fell 25 to 529, easing shutdown-related concerns. Job cuts told an encouraging story, with US employers announcing just 48,307 layoffs in February less than half of January's 108,435 and well below year-ago levels. Tech led cuts at 11,039, with analysts citing AI disruption, regulatory pressures, and tariff-driven advertising slowdowns as key drivers.

Challenger, Gray & Christmas warned that US involvement in the West Asia war could accelerate layoff announcements as companies tighten belts through Q1. Labour productivity rose 2.8% in Q4 2025 — beating the 1.9% forecast though slowing from Q3's 5.2% surge — as output grew 2.6% while hours worked edged down. Manufacturing productivity fell 1.9% as output dropped 2.2%.

Takeaway:
The labour market is stable but showing early signs of strain, including rising continuing claims, tech layoffs from AI disruption, and slowing manufacturing productivity. The West Asia conflict adds to cost uncertainty, and Challenger's warning of more layoffs in Q1 signals potential labour market deterioration.

WHAT HAPPENED OVERNIGHT

• US stocks fall as West Asia conflict enters day six, airlines; financials drag
  • All three major indices closed lower as surging oil and inflation fears returned to dominate sentiment.
  • Airlines tumbled 5.4% with Southwest dropped 6.9% as fuel cost concerns and West Asia airspace disruption hit the sector hard.
  • JPMorgan and Goldman Sachs declined, weighing on the Dow as financial sector confidence wobbled.
  • Conflict spreading to more countries stoked fresh fears of prolonged Hormuz disruption, choking tanker traffic further.
  • Jobless claims were unchanged last week, signalling a stable labour market.
  • Strong ISM manufacturing and services data raised payroll expectations but added to inflation concerns.

• US Treasury yields hits one-month high as inflation fears, strong data combine
  • The 10-year US Treasury yield rose to 4.14%, its highest in a month, marking a fourth straight session of gains.
  • Both the US and Iran vowed to escalate attacks, reigniting energy price fears and extending the global bond selloff.
  • Rising oil and gas prices are stoking fears of a prolonged inflationary spiral, keeping pressure on yields.
  • Jobless claims came in below forecasts, productivity beat expectations, and job cuts declined sharply.
  • The ISM Services PMI hit its fastest pace since mid-2022, reinforcing the strength of the US economy.
  • The 10-year has now climbed nearly 25 basis points from its sub-4% lows hit just last week.

• US Dollar rebounds as ceasefire hopes fade and West Asia tensions flare 
  • The US dollar index rose 0.5% to 99.26, reclaiming ground after Wednesday's brief pullback from three-month highs.
  • Iran warned Washington would "bitterly regret" the sinking of its warship off Sri Lanka, swiftly extinguishing ceasefire optimism.
  • The euro fell 0.4% to $1.1580 and sterling dropped 0.3% to $1.3326 as safe-haven flows returned to the dollar.
  • Earlier de-escalation hopes proved short-lived, with fresh West Asia uncertainty driving investors back to the greenback.

• Crude oil surges to multi-year highs as US-Iran war chokes global supply
  • Brent crude prices gained 4.93% to $85.41/barrel, a fifth straight session of gains. While WTI surged 8.51% to $81.01/barrel, its highest since July 2024.
  • WTI outpaced Brent as Washington signalled it may intervene in futures markets to combat rising energy prices.
  • Growing disruption to West Asia oil supply flows drove the rally.
  • The Strait of Hormuz remains severely disrupted, with no resolution in sight.
  • Brent is now up nearly 20% since the conflict began less than a week ago. 
    

Day’s Ledger*
Economic Data

• Eurozone GDP Data
• India FX Reserves
• US Unemployment Data
• US Retail Sales Data

Corporate Actions

• Anlon Healthcare board to consider stock split
• IOC board to consider interim dividend 
• Sun TV board to consider interim dividend

Policy Events

• ECB President Lagarde Speech
• ECB Cipollone Speech

Tickers to Watch

• RIL's telecom, retail and new biz could mitigate impact of West Asia crisis
• MakeMyTrip buys majority stake in Flamingo Transworld to boost packages
• Embassy REIT raises ₹14 billion via 10-year NCD to boost long-term capital
• Motilal Oswal buys 1.65% stake in Zelio E-Mobility for ₹98 million
• Adani Total Gas hikes industrial prices amid conflict in West Asia

Must Read

• India seeking US marine cover for West Asia energy cargoes: Report
• RBI intervention helps rupee rebound 0.6% after record low, best in a month
• War-risk insurance and ATF surge push Gulf-India fares up 3-4 times
• War with Iran to cost $3 billion a week under current limitations: Israel
• Iran has not approached Russia for arms supplies, says Kremlin
• Oil prices rise as West Asia crisis chokes off vital oil, gas supply
• India-Finland talks show peace push; foreign secretary meets Iran envoy
  
  

See you tomorrow with another edition of The Morning Edge.
Have a great trading day

𝐈𝐧𝐝𝐢𝐚’𝐬 𝐟𝐢𝐧𝐚𝐧𝐜𝐢𝐚𝐥 𝐬𝐮𝐩𝐞𝐫𝐯𝐢𝐬𝐢𝐨𝐧 𝐢𝐬 𝐮𝐧𝐝𝐞𝐫𝐠𝐨𝐢𝐧𝐠 𝐚 𝐪𝐮𝐢𝐞𝐭 𝐬𝐡𝐢𝐟𝐭.

As payments run 24×7 and fintech blurs regulatory boundaries, risks increasingly emerge across interconnected systems rather than on individual balance sheets.

Abhishek Dey writes, recent RBI initiatives—from customer service benchmarking to SRO frameworks in fintech and markets—suggest a move towards ecosystem-level governance.

The message is subtle but clear: in a digital financial system, stability depends on networks, not just institutions.

(*Compiled from various media sources)