Asia Opens Subdued as Ceasefire Cracks Revive Oil, Inflation Concerns

GLOBAL MOOD: cautious risk-off
Drivers: Ceasefire Relief, Escalation Risk

Asian equity markets turned cautious on Thursday as early signs of strain in the West Asia ceasefire weighed on sentiment, pushing oil prices higher and reviving concerns over prolonged inflationary pressures. Uncertainty around the effective reopening of the Strait of Hormuz persisted, with Iran asserting control over transit flows and reportedly demanding conditions for safe passage, limiting confidence in supply normalisation.

Regional markets reflected the shift in tone, with Japan’s Nikkei trading largely flat after the previous session’s sharp rally, while South Korea declined 0.4% following strong prior gains. Broader Asia-Pacific markets also edged lower, indicating a pause in risk appetite as investors reassessed geopolitical and inflation risks.

TODAY’S WATCHLIST
 - US Initial Jobless Claims
 - TCS Earnings

THE BIG STORY
The fragile two-week ceasefire in West Asia came under immediate strain as Israel launched its heaviest strikes yet on Lebanon, reportedly killing hundreds and widening the conflict footprint beyond initial expectations. The escalation has drawn a sharp response from Iran, with senior leadership indicating that continuing peace talks under such conditions would be “unreasonable”. The developments highlight how quickly the situation is shifting on the ground, even as diplomatic channels remain formally open ahead of planned negotiations.

Iran has accused both Israel and the US of breaching ceasefire conditions, pointing to intensified operations against Hezbollah and continued pressure on Tehran to abandon its nuclear ambitions. The divergence in negotiating positions raises doubts over whether the ceasefire can hold through the proposed timeline, keeping geopolitical risk elevated despite the earlier agreement.

From a macro perspective, the uncertainty is feeding directly into policy concerns. Recent Federal Reserve commentary underscores rising risks to both inflation and growth, with policymakers highlighting that a prolonged conflict could sustain higher energy prices and pass through into core inflation. While the Fed has kept rates steady at 3.5%–3.75%, the balance of risks has tilted, reinforcing a cautious policy stance amid an increasingly volatile geopolitical backdrop.

Data Spotlight
US crude inventories rose by 3.1 million barrels to 464.7 million, significantly above expectations, signalling a near-term supply build. However, underlying demand trends remained firm, with gasoline stocks falling by 1.6 million barrels and distillates dropping sharply by 3.1 million barrels, both exceeding estimates. Refinery activity softened slightly, with utilisation at 92%, while net crude imports declined by 758,000 barrels per day, reflecting tighter external supply flows.

In contrast, the UK housing market showed renewed signs of weakness, with the RICS house price balance falling to -23% in March from -14%, the lowest since December 2023. Forward-looking indicators deteriorated further, with near-term expectations dropping to -43%, pointing to intensifying downward pressure on prices, particularly across southern regions.

Takeaway:
While US energy data reflects mixed signals with firm product demand, weakening UK housing indicators highlight broader cracks in global growth momentum.

WHAT HAPPENED OVERNIGHT

• US stocks surge on ceasefire-driven relief rally
  • Dow Jones jumped 2.85%, S&P 500 gained 2.51%, and Nasdaq rose 2.80%.
  • Broad-based rally driven by two-week ceasefire agreement between US and Iran, easing geopolitical risk.
  • Relief sentiment lifted cyclical and travel stocks, with airlines and cruise operators posting strong gains.
  • Delta Air Lines rose 3.8% despite weak outlook, while Southwest Airlines and United Airlines gained 6.7% and 7.9%.
  • Carnival surged 11.2% and Norwegian Cruise Line advanced 7.6% on improved travel sentiment.
  • Levi Strauss jumped 10.7% after raising annual sales and profit forecasts.
  • Fed March minutes indicate openness to rate hikes, citing higher inflation outlook due to energy shock.

• US Treasury yield steady as ceasefire doubts offset earlier relief
  • The 10-year yield holds broadly flat after erasing earlier 7 bps decline below 4.30%.
  • Yields stabilise as Iran flags ceasefire violation, raising concerns over renewed escalation.
  • Oil price pullback that eased inflation fears now at risk amid uncertainty around Strait of Hormuz flows.
  • Reports of continued threats to tanker operators dampen optimism on normalised energy supply.
  • Fed minutes highlight rising concern over inflation due to energy shock.
  • Focus shifts to upcoming US CPI data, expected to show a sharp increase in inflation.

• US Dollar weakens as ceasefire eases inflation fears
  • The US dollar index remains below 99, near one-month low amid improving risk sentiment.
  • Ceasefire between US and Iran drives sharp fall in oil prices, easing inflation concerns.
  • Markets shift to pricing potential rate cuts later this year after earlier expectations of no easing.
  • Fed minutes highlight concern over persistent inflation risks from energy shock.
  • Policymakers still signal likelihood of at least one rate cut despite elevated uncertainty.

• Oil plunges below $100 on ceasefire-driven supply relief
  • Brent crude falls 13.3% to $94.75 per barrel, while WTI drops 16.4% to $94.41.
  • Sharp decline driven by expectations of Strait of Hormuz reopening after US–Iran ceasefire.
  • Markets unwind geopolitical risk premium built during peak conflict phase.
  • Price correction marks steepest fall since 2020 amid easing supply disruption fears.
  • Despite sharp decline, oil remains elevated relative to pre-conflict levels.

Day’s Ledger*

Economic Data

• US Initial Jobless Claims  

Corporate Actions

• Jan-Mar Earnings: Anand Rathi, GM Breweries, TCS
• PAE board to consider bonus share issue
• RSWM board to consider fund raising  

Tickers to Watch

• Higher fuel prices, ethanol push may accelerate EV shift: BMW India
• Hilton to open 125 Hampton hotels across India under franchise deal
• Max Healthcare acquires 58.4% stake in Kalinga Hospital for ₹300 crore
• MUFG Bank acquires 20% stake in Shriram Finance for Rs 39,618 crore
• Equinix opens fourth Mumbai data centre with $95 million investment
• Permira to invest $100 million in SILA to back expansion, tech push
• Future Consumer reports ₹615 crore default on loans, interest payments
• Adani Group to invest ₹33,081 crore in Odisha across three projects

Must Read

• War Breaks the Policy Cycle
  
• When Policy Turns to Risk Management
  
• Risk Signals, Not Reassurance from RBI’s GDP, CPI Projections
  
• RBI’s Optimism Sits Uneasily with Its Own Risk Diagnosis
  
• World Bank raises India FY27 growth forecast to 6.6% amid headwinds
  
• Israel backs ceasefire but deal excludes fighting in Lebanon: Netanyahu
  
• Centre hikes non-urea fertiliser subsidy 10-21% amid West Asia crisis
  
• Indian Oil buys first shipment of Iranian crude since 2019 sanctions
  
• Hormuz Reset Redraws Power Lines in West Asia 

 

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See you tomorrow with another edition of The Morning Edge.

Have a great trading day

𝐑𝐁𝐈 𝐒𝐭𝐚𝐲𝐬 𝐨𝐧 𝐇𝐨𝐥𝐝, 𝐛𝐮𝐭 𝐒𝐢𝐠𝐧𝐚𝐥𝐬 𝐅𝐥𝐞𝐱𝐢𝐛𝐢𝐥𝐢𝐭𝐲 𝐢𝐧 𝐚 𝐒𝐡𝐢𝐟𝐭𝐢𝐧𝐠 𝐑𝐢𝐬𝐤 𝐋𝐚𝐧𝐝𝐬𝐜𝐚𝐩𝐞

A lot can change in a few days—and for the Reserve Bank of India, it did. By the time the MPC wrapped up its April meeting, a ceasefire had eased the global backdrop, but not the underlying uncertainty shaping policy.

Aastha Gudwani writes, The RBI held rates at 5.25% and kept its stance neutral, but the signal was less about pause and more about flexibility. Growth is seen at 6.9% and inflation at 4.6%, with risks still live on both sides. FX measures have been framed as temporary, targeted responses—not a shift in regime. In a world of supply shocks and shifting narratives, policy is no longer about direction, but about optionality.

(*Compiled from various media sources)