Oil Slumps as US-Iran Fighting Stops

Global equity markets rallied on Monday after crude oil prices tumbled more than 7%, triggered by an apparent pause in hostilities between the United States and Iran. Neither government has officially confirmed the reason behind the halt, leaving investors to weigh whether it signals a genuine step toward peace talks or simply a tactical pause. Attention now turns to a packed week of central bank decisions from the Federal Reserve, Bank of England, and Bank of Japan, alongside a wave of hyperscaler earnings reports.

Asian-Pacific stock indices closed higher across the board as investors welcomed the break in US-Iran hostilities after nearly a fortnight of continuous attacks on Iranian targets. The US was the side to halt strikes, fuelling speculation that American forces may be running low on viable targets or ordnance. Tehran has said it will refrain from further military action for as long as Washington does the same.

The sudden drop in crude oil gave regional indices a significant boost:

• Japan's Nikkei rose 0.5%, despite a 3.1% drop in SoftBank
• Australia's ASX 200 jumped 1.4%
• Hong Kong's Hang Seng and South Korea's Kospi each added 1.0%
• China's Shanghai Composite gained 1.2%

Chinese sentiment was further boosted by a blockbuster stock market debut from chipmaker Changxin Technology Group, the largest Asian-Pacific IPO of the year so far. The stock surged 470% on its opening day, briefly making it China's most valuable listed company and helping offset last week's tech sell-off, which saw Alphabet and Intel each fall around 10% despite posting solid quarterly results.

European Stocks Firm as Oil Majors Take a Hit

European indices opened firmer, tracking gains across Asian-Pacific equities and US index futures. Investors largely shrugged off ongoing concerns around AI hyperscalers and semiconductor stocks, instead focusing on the sharp oil price decline since Friday.

Reports suggest military activity across the Gulf and the Strait of Hormuz has come to a complete halt, although Iranian-backed Houthi forces in Yemen continue to target shipping through the Red Sea and Gulf of Aden. European oil majors fell in early trade, with BP down 3.7%, Shell down 1.7%, and TotalEnergies down 4.5%.

On the earnings front, AstraZeneca rose 1.7% after reporting better-than-expected earnings per share, with revenues in line with expectations.

Central Banks in Focus This Week

The European Central Bank held interest rates steady last week, as expected. Markets now turn to three major rate decisions:

• US Federal Reserve — Wednesday
• Bank of England — Thursday
• Bank of Japan — Friday

All three are expected to hold rates steady, though the CME FedWatch Tool currently prices in a 34% probability of a 25 basis point Fed rate hike — an unusually high level of uncertainty this close to a meeting. This reflects Fed Chair Kevin Warsh's approach of withholding forward guidance, leaving both markets and the FOMC to interpret the same economic data independently.

Source: TN Trader 

The US Dollar Index softened across the board Monday morning, gapping below 101.00 after ending last week near 101.20. The dollar's earlier strength had been driven by flight-to-quality demand amid escalating US-Iran tensions, but that support faded as hostilities paused and oil prices fell sharply.

The Bank of Japan, which has raised rates by 125 basis points since early 2024, is expected to hold its policy rate steady this week at an upper limit of just 1.0% — a level that continues to weigh on the yen. USD/JPY eased slightly to 163.50, still close to Thursday's 40-year high just below 164.00.

Despite the pullback, the dollar remains reasonably well supported heading into Wednesday's Fed decision. According to the CME FedWatch Tool, the probability of at least one rate hike before year-end currently stands at 90%.

Source: TN Trader 

US stock index futures pointed higher Monday morning as investors responded to the sharp drop in crude oil following the weekend pause in US military action against Iran. As in other regions, neither Washington nor Tehran has officially confirmed the ceasefire, and Houthi forces continue to disrupt shipping through the Bab al-Mandeb strait.

US Majors Under Pressure Last Week

All major US indices lost ground last week, led by weakness in technology stocks:

• Dow Jones Industrial Average: -0.4%
• S&P 500: -0.6%
• Nasdaq Composite: -2.1%
• Russell 2000: -1.1%

Alphabet shares fell around 14% over two sessions following its quarterly results. The earnings and revenue figures themselves were solid, but the company's announcement of increased capital expenditure for the rest of the year — alongside negative quarterly cash flow — unsettled investors.

Hyperscaler Earnings and AI Spending in the Spotlight

Markets are now bracing for further hyperscaler updates, with Microsoft and Meta reporting after Wednesday's close, and Amazon and Apple both due Thursday after the bell. AI-related capital expenditure has been a key driver of market gains over the past year, but the scale of that investment can no longer be funded from cash flow alone — companies are increasingly turning to bond issuance and equity sales instead. With returns on this spending still uncertain, any signal that a hyperscaler is scaling back investment plans could trigger a sharp market reaction, particularly as Chinese firms continue to develop cheaper, open-weight AI models using domestically produced chips.

Source: TN Trader 

Crude Oil

Crude oil gapped sharply lower on Sunday night after the US halted its nearly two-week campaign of strikes on Iranian targets without explanation. Iran has said it will hold off on offensive action for as long as the US does, though it remains unclear whether this marks a genuine step toward peace talks or simply reflects US forces running low on targets or munitions.

September Brent crude, which approached $102 per barrel last Thursday — an eight-week high — fell back toward $87.50 on Monday, its lowest level in almost a week. According to its daily MACD, oil has swung from deeply oversold to significantly overbought within the space of a month, suggesting further positive developments in the US-Iran situation could send prices lower still.

Source: TN Trader 

Gold and silver both gapped higher as markets reopened after the weekend, as relief over the pause in hostilities reduced demand for the US dollar as a safe haven. However, both metals have since pulled back from their intraday highs — gold failed to hold above $4,100 per ounce, while silver slipped back below $60 per ounce. Tensions remain elevated in the region, with Houthi forces continuing to target shipping in the Red Sea and Gulf of Aden despite President Trump's recent warning of "major military punishment" against Tehran and its allies.

Source: TN Trader 

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