US-Iran Tensions Ease, Global Markets Rebound, Japanese and South Korean Stocks Rise Slightly, Oil Prices Plunge, Bond Market Strengthens

Oil prices plunged, bonds rose, gold climbed, and the US dollar softened—as the US and Iran paused mutual strikes, triggering a widespread relief of risk-off sentiment in global markets.

By the early trading close, the Nikkei 225 rose 0.2%, and the TOPIX rose 1%. The Korea Composite Stock Price Index rose 0.29%. Brent crude once plummeted more than 7%, falling below $90 per barrel, though it subsequently recovered about half of its losses. Meanwhile, the yield on the US 10-year Treasury note declined by 5 basis points to 4.63%, with government bonds across the Asia-Pacific region generally strengthening, and European bond futures also rising in tandem—the drop in oil prices effectively alleviated market concerns about reigniting inflation. The yield on Japan's 10-year government bond also fell by 6 basis points to 2.755%.

This respite set the tone for global markets this week, but uncertainty has not dissipated. Traders are closely watching the Federal Reserve's interest rate decision on Wednesday—recent surges in oil prices had sparked inflation concerns, reigniting expectations of rate hikes. Meanwhile, earnings reports from tech giants such as Microsoft, Meta, Apple, and Amazon will be released sequentially, and market doubts remain about whether heavy capital expenditures on artificial intelligence can generate sufficient returns.

• By the early trading close, the Nikkei 225 rose 0.2%, and the TOPIX rose 1%. The Korea Composite Stock Price Index rose 0.29%.
• The yield on the US 10-year Treasury note fell 5 basis points to 4.63%
• The yield on Japan's 10-year government bond fell 6 basis points to 2.755%.
• The yen appreciated to approximately 163.55 per US dollar.
• Brent crude prices fell 7.4%, dropping below $90 per barrel.
• Gold climbed to near $4,100 per ounce, driving the precious metals sector higher overall.
• Bitcoin rose 1.1%, trading at $65,298.31.

US-Iran Ceasefire Enters the Picture, Market Sentiment Improves

After launching 13 days of continuous airstrikes against Iran, the US visibly paused operations starting late last Friday evening, without providing any explanation. The Iranian military also stated on Sunday that Tehran had suspended its military response.

This de-escalation pushed the MSCI Asia Pacific Index up 0.5% and Nasdaq 100 futures up 1.2%, indicating a potential rebound after chip stocks faced selling pressure late last week. European stocks are also expected to rise accordingly. The Nikkei 225 closed 0.2% higher in early trading, and the TOPIX rose 1%.

However, the market remains cautious about whether the easing of tensions can be sustained. Fabien Yip, a market analyst at IG International in Sydney, stated: "The US-Iran ceasefire has lowered oil prices, but the relief in equity markets has been relatively limited. The back-and-forth tug-of-war is causing real fatigue—until substantive evidence emerges, such as the resumption of navigation through the Strait of Hormuz, the market is reluctant to price in a lasting de-escalation."

Inflation Path Uncertain, Fed Rate Hike Suspense Unresolved

Oil prices surged significantly in July, temporarily overshadowing the positive signal from the lower-than-expected US Consumer Price Index for June, making the Federal Reserve's policy direction increasingly ambiguous. Brent crude has still accumulated a gain of over 50% year-to-date, and the impact of Middle East supply disruptions has not fully subsided.

Krishna Guha, Head of Central Bank Strategy at Evercore ISI, wrote in a report: "We believe the Federal Reserve is unlikely to raise rates. Raising rates immediately after favorable June inflation data would appear quite abrupt—if necessary, a rate hike in September would be a smoother path. However, we cannot reduce the probability of a rate hike too low."

The Bank of England and the Bank of Japan will also announce their policy decisions this week.

Tech Earnings Become the Next Focus

As the risk from oil prices briefly receded, market attention shifted to the dense schedule of tech giant earnings reports this week. Microsoft and Meta will report results on Wednesday, followed by Apple and Amazon on Thursday. In Asia, Samsung Electronics and SK Hynix will also disclose their earnings this week.

Tim Waterer, Chief Market Analyst at KCM Trade in Sydney, stated: "Looking ahead, the earnings performance and capital expenditure plans of tech companies will return to the core of the discussion. Given that market concerns persist regarding how long it will take for investment returns to fully materialize, traders remain nervous about the scale of massive capital expenditures."

Bloomberg strategist Mark Cranfield also pointed out that investors are re-examining the self-reinforcing cycle within the AI theme, which could trigger potential valuation risks. It was reported that Nvidia is negotiating to provide guarantees for OpenAI to assist in renting computing power from large data centers developed by SoftBank Group.

Asian Currencies Diverge, Indonesian Assets Under Pressure Across the Board

In the currency market, the Singapore dollar strengthened against the US dollar after authorities further tightened monetary policy. Indonesia suffered an unexpected shock—the sudden resignation of Bank Indonesia Governor Perry Warjiyo led to a broad decline in the Indonesian rupiah, government bonds, and the stock market. The US dollar softened broadly against G10 currencies, while gold climbed to near $4,100 per ounce, driving the precious metals sector higher overall. The yen appreciated to approximately 163.55 per US dollar.