Asian Stocks Rise as Oil Retreats on Strategic Reserve Talk

GLOBAL MOOD: Cautiously Risk-On
Drivers: Iran threatens Gulf oil blockade, Russia feeds targeting intel, US bases under missile attack

Asian equity markets opened higher on Wednesday, reflecting a cautious risk-on tone as oil prices retreated from earlier spikes tied to the Middle East conflict.

Investor sentiment improved after reports that the International Energy Agency may coordinate the largest-ever release of strategic oil reserves to stabilise supply. The prospect of emergency stockpiles entering the market helped ease fears of a prolonged energy shock, pulling crude prices well below the near $120 levels seen earlier in the week. 

However, lingering geopolitical tensions continue to keep markets on edge.

TODAY’S WATCHLIST
 - US CPI Inflation Data
 - US Fed Bowman Speech

THE BIG STORY
The US and Israel launched their most intense airstrikes on Iran yet on Tuesday, even as global markets bet on an imminent conflict resolution. Iran's Revolutionary Guards dramatically raised the stakes, threatening to block all oil shipments from the Gulf unless US and Israeli attacks cease, a move that would represent the most severe energy supply shock in modern history. The Guards followed through with missile strikes on Qatar's Al Udeid base and the Al Harir base in Iraqi Kurdistan, followed by drone attacks on Al Dhafra air base in the UAE and the Juffair naval base in Bahrain. Early Wednesday brought another round of Iranian attacks on US installations in Bahrain and waves of missiles fired at central Israel, underscoring that despite Trump's war-end signals, the conflict is actively escalating on the ground.

The geopolitical dimension deepened significantly as Democratic senators sounded the alarm over potential US ground troop deployment following a classified Senate Armed Services Committee briefing. Senator Jeanne Shaheen revealed that Russia is already providing Iran with targeting intelligence on US bases and ships — confirming fears of a Russia-China-Iran-North Korea axis actively working against US interests. Two independent sources familiar with US intelligence reports corroborated the Russian targeting intelligence claim as per Reuters report. The revelation transforms the West Asia conflict from a bilateral US-Iran confrontation into a potential proxy war between the world's major power blocs, a scenario that markets have not yet fully priced and one that dramatically complicates any near-term path to resolution.

Data Spotlight
In February, existing home sales in the United States increased by 1.7% to an annualized rate of 4.09 million units, surpassing forecasts of 3.89 million, as enhanced affordability attracted buyers to the market. Unsold inventory, however, rose by 2.4% to 1.29 million units, representing 3.8 months of supply. The median sales price saw a marginal year-on-year increase of 0.3%, reaching $398,000. According to National Association of Realtors Chief Economist Lawrence Yun, although there has been a notable rebound, home sales remain one million units below 2019 levels despite the addition of six million jobs, indicating persistent structural affordability challenges.

Meanwhile, small business sentiment declined for the second consecutive month, with the NFIB Optimism Index falling to 98.8 in February from 99.3, below the anticipated 99.7, as heightened competition from larger businesses exerted pressure on Main Street firms. Expectations for higher real sales volumes dropped eight points to a net 8%; nevertheless, owners reported improved profits and greater confidence in near-term outlook.

Takeaway:
The housing recovery shows promise but remains unstable, as inventory now outpaces sales and limits price gains. Small business optimism is down for the second month, indicating that early 2025’s confidence boost is fading amid competition and economic uncertainty.

WHAT HAPPENED OVERNIGHT

• US stocks lose momentum as Iran mine threat revives war fears
  • The S&P 500 Dow slipped into negative territory after early gains faded. The Nasdaq eked out a nominal gain.
  • Trump threatened retaliation after reports that Iran was deploying mines in the Strait of Hormuz, renewing calls for Iran's total surrender.
  • Chipmakers bucked the trend with Nvidia gained 1.2%, SanDisk surged 5.1%, and Western Digital rose 1.6%.
  • The S&P Software & Services index fell 1.7% as the session's clear underperformer as AI disruption fears resurfaced.
  • Centene crashed over 16% despite reaffirming its 2026 profit forecast, reflecting deep investor skepticism toward health insurance guidance.
  • Oracle jumped over 7% in after-hours trading following a strong quarterly earnings report.

• US Treasury yield held at 4.1% as oil retreat eases inflation fears and rate-cut bets return
  • The 10-year Treasury yield held at 4.1%, staying below the near-one-month high of 4.15% touched on March 5th.
  • Oil's 11% single-session plunge directly eased inflation concerns, taking pressure off the long end of the curve.
  • Trump's signal of an imminent end to the Iran war reinforced the view that the energy shock would be short-lived.
  • G7 leaders enquired with the IEA on potential strategic reserve releases adding a coordinated policy backstop to the oil retreat.
  • Rate traders moved to price in an additional Fed rate cut this year, reflecting the rapidly shifting inflation outlook.

• US Dollar stay below 99 as war-end hopes drain safe-haven demand
  • The US dollar index remained below 99, extending Monday's sharp intraday drop as conflict resolution signals reduced safe-haven flows.
  • Trump confirmed the Iran operation is running well ahead of the four-to-five-week timeline and nearing its conclusion.
  • Plans to waive oil-related sanctions and have the US Navy escort tankers through the Strait of Hormuz provided further relief to energy and currency markets.
  • The dollar's recent rally had been built entirely on safe-haven demand and inflation fears, both of which are now partially unwinding.
  • A swift end to hostilities and Hormuz reopening would remove the key pillars supporting the dollar's elevated levels.

• Crude oil plunges 11% in biggest single-day drop since 2022 on war-end hopes
  • Brent crude prices crashed 11% to $87.80/barrel, its biggest single-day percentage loss since March 2022. While WTI plummeted 11.9% to $83.45/barrel, also the steepest drop since March 2022.
  • Trump's prediction of a quick end to the Iran war and plans to keep oil prices in check triggered the mass unwinding of geopolitical risk premium.
  • G7's readiness to release strategic reserves added further downward pressure, signalling coordinated supply-side intervention if needed.
  • In under 48 hours, WTI has swung from $119 to $83 — a $36 range that reflects a market trading purely on conflict headlines with no fundamental anchor.

Day’s Ledger*

Economic Data

• India M3 and Reserve Money Data
• US CPI Inflation Data
• OPEC Monthly Report

Corporate Actions

• 5Paisa Capital board to consider rights share issue
• Amarnath Securities board to consider fund raising
• Regal Entertain board to consider rights share issue
• Vardhman Polytex board to consider fund raising

Policy Events

• ECB Guindos Speech
• ECB Schnabel Speech
• US Fed Bowman Speech

Tickers to Watch

• Allana Group plans to ship 40,000 tonnes of food products to West Asia
• TVS Supply Chain sets up warehouse in Chennai to support Caterpillar India
• IndiGo CEO Pieter Elbers resigns after airline's major outage crisis
• Hindustan Zinc signs MoU with CMR Green to set up zinc alloy unit
• Emami Agrotech eyes ₹20 billion from HoReCa, food services segment
• Tata Consultancy Services wealth erosion tops $100 billion from peak
• Happiest Minds Technologies revises FY27 revenue growth guidance to 12.5%

Must Read

• LPG production increased by 10%, crude oil position is sound and improving, says govt source
• NSE asks brokers to disclose and remit excess STT collected for FY24 and earlier
• Govt seeks Parliament’s nod for additional ₹2.01 trillion spending in FY26
• SIP inflows stand at ₹298.45 billion in February
• RBI caps bank dividend payout at 75% of profit after tax under new norms
• Cabinet eases FDI curbs for border nations; sets 60-day approval timeline
• Iran's security chief warns Trump to 'be careful not to be eliminated'
  
  

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

Petronet and GAIL Are Not the Same Stock but Markets Miss the Point

Petronet LNG and GAIL dropped together and at roughly the same rate after the Qatar force majeure announcement. But structurally they are very different businesses.

Dev Chandrasekhar writes, Petronet remains heavily exposed to Ras Laffan supply through Hormuz. GAIL’s portfolio includes flexible US LNG contracts and diversified infrastructure.

(*Compiled from various media sources)