Asian markets slipped on Tuesday as Middle East tensions overshadowed truce hopes between the U.S. and Iran, with oil prices dipping but holding firm above $100 a barrel.
The Strait of Hormuz remained a flashpoint after fresh clashes between U.S. and Iranian forces on Monday, as they vied for control through rival blockades. This key waterway carries 20 per cent of the world’s oil, a vulnerability exposed since the 1980s tanker wars according to Reuters.
President Donald Trump’s Project Freedom effort to clear stranded tankers saw limited success, with Maersk confirming its U.S.-flagged Alliance Fairfax escaped under naval escort despite widespread shipping delays.
The renewed hostilities rattled investors, underscoring the conflict’s persistence in the region. “We started yesterday with high hopes that operation ‘Project Freedom’ would be, I guess, a success on the ground, that it was being pitched as more of a humanitarian effort,” said Tony Sycamore, market analyst at IG. “But as we saw, the Iranians weren’t taking that bait at all. It really signifies that the stalemate remains in place, it’s been a very shaky start.”
MSCI’s Asia-Pacific index outside Japan fell 0.3 per cent, while Australia’s ASX 200 lost 0.4 per cent in quiet trade; Japan and South Korea were closed for holidays. U.S. Nasdaq and S&P 500 futures each eased 0.1 per cent, EURO STOXX 50 dropped 0.2 per cent, and FTSE futures tumbled 0.75 per cent.
Brent crude settled 0.5 per cent lower at $113.85 a barrel, with West Texas Intermediate down 1.3 per cent to $105.03 after prior supply fears. Traders eyed earnings from Advanced Micro Devices and Pfizer, as 83 per cent of early S&P 500 reporters beat EPS estimates per S&P Global data.
“With no signs of slowing down, AI-driven spending will likely continue to do the heavy lifting for S&P 500 earnings growth, led by the technology sector,” said Jeff Buchbinder, chief equity strategist at LPL Financial.
Japan’s yen steadied at 157.22 per dollar after a brief rally, with Finance Minister Satsuki Katayama warning against speculation amid intervention talk. “We suspect intervention will merely act as a lid on USD/JPY, not a catalyst for protracted yen strength,” said RBC’s Abbas Keshvani.
Australia’s dollar nudged to $0.7163 before an expected RBA hike, while the U.S. dollar firmed on safe-haven demand. Spot gold rose 0.2 per cent to $4,529.19 an ounce.