Asian Markets Mixed; Trump-Xi Talks in Focus as Middle East Tensions Persist

GLOBAL MOOD: Risk-Off
Drivers: Iran Deadlock, Inflation Risks

Asia-Pacific markets reflected a cautious risk-off mood on Wednesday as investors weighed stronger-than-expected US inflation data alongside persistent geopolitical tensions in West Asia. Regional equities traded mixed, with concerns over elevated oil prices and uncertainty surrounding the fragile US-Iran ceasefire limiting broader risk appetite.

Investor sentiment weakened after US President Donald Trump described the ceasefire with Iran as being on “massive life support” and rejected Tehran’s latest proposal to end the conflict. Additional pressure came after Defense Secretary Pete Hegseth indicated the administration could resume military strikes without congressional approval, raising fears of renewed escalation in the Strait of Hormuz region.

Markets were also assessing the implications of rising energy prices on inflation and interest rates, especially after hotter US consumer price data reduced expectations of near-term Federal Reserve rate cuts. Attention is now shifting toward the upcoming Trump-Xi meeting, where investors will watch for signals on trade relations and broader geopolitical coordination. Concerns over Iran’s growing influence on regional energy routes and uncertainty around future US monetary policy continued to keep market sentiment fragile.

THE BIG STORY
US President Donald Trump said he did not believe China’s assistance would be necessary to resolve the conflict with Iran, even as prospects for a durable peace agreement continued to weaken ahead of his summit with Chinese President Xi Jinping. Trump stated that the US would resolve the conflict “peacefully or otherwise,” underscoring the increasingly confrontational tone surrounding stalled negotiations.

Meanwhile, Iran appeared to strengthen its strategic grip over the Strait of Hormuz by reportedly securing energy transport arrangements with Iraq and Pakistan. The development raised concerns that Tehran could establish longer-term influence over one of the world’s most critical energy corridors, through which roughly one-fifth of global oil supply normally passes. Markets remained concerned that prolonged disruption and shifting regional trade arrangements could structurally alter energy flows across West Asia.

Separately, the US Senate confirmed Kevin Warsh to a new Federal Reserve term, positioning him to potentially succeed Jerome Powell as Fed Chair. The transition drew attention because of increasing political pressure from the Trump administration on the Federal Reserve regarding interest rate policy and institutional independence.

The combination of unresolved geopolitical tensions, rising energy security concerns and uncertainty around future US monetary policy added to broader market unease.

Data Spotlight
US inflation accelerated sharply in April, with headline CPI rising to 3.8% year-on-year, the highest level since May 2023 and above market expectations. The increase was driven primarily by the energy shock linked to the conflict in West Asia and continued disruption in the Strait of Hormuz, which pushed fuel and transportation costs significantly higher.

Energy inflation surged to 17.9%, its steepest increase since 2022, led by sharp rises in gasoline and fuel oil prices. Shelter and food inflation also remained elevated, indicating broader pass-through effects on the wider consumer basket. On a monthly basis, headline CPI rose 0.6%, while core inflation accelerated to 2.8% annually and 0.4% month-on-month, both exceeding forecasts.

Core price pressures broadened across sectors, including shelter, transportation services and apparel, suggesting that higher energy costs were increasingly feeding into underlying inflation trends. The data reinforced concerns that inflation could remain sticky even if headline energy prices stabilise.

Takeaway:
The inflation backdrop in the US deteriorated meaningfully as the West Asia conflict continued to disrupt energy markets, strengthening expectations that the Federal Reserve will maintain a restrictive policy stance for longer.

WHAT HAPPENED OVERNIGHT

• US stocks fell as hotter inflation and ceasefire concerns weighed on sentiment
  • S&P 500 fell 0.16% and Nasdaq declined 0.71%, retreating from recent record highs.
  • Dow Jones edged higher, supported by strength in healthcare shares.
  • Higher-than-expected US inflation data reinforced concerns over prolonged restrictive monetary policy.
  • Fragile US–Iran ceasefire and continued Strait of Hormuz disruptions added to market uncertainty.
  • Technology stocks led declines as investors reassessed valuations and macro risks.
  • Humana surged 7.7% after a major price target upgrade.
  • GameStop declined after eBay rejected its takeover proposal.
  • Zebra Technologies and Venture Global rallied on stronger outlooks, while Hims & Hers Health fell sharply after weak results.

• US Treasury yields stayed elevated as inflation and West Asia tensions intensified
  • The 10-year US Treasury yield held above 4.4%, near recent multi-month highs.
  • Rising oil prices continued to fuel inflation concerns across global markets.
  • US headline inflation accelerated to 3.8%, highest since March 2023 and above expectations.
  • Core inflation also surprised to the upside at 2.8%, reinforcing higher-for-longer rate expectations.
  • Donald Trump described the Iran ceasefire as “on life support” after rejecting Tehran’s response.
  • Persistent tensions in West Asia kept markets concerned about prolonged energy supply disruptions.
  • Investors increasingly reduced expectations for Federal Reserve rate cuts in the near term.

• US Dollar strengthened as inflation and geopolitical risks boosted safe-haven demand
  • The US dollar index rose 0.4% to 98.36, marking a second consecutive daily gain.
  • Greenback was on track for its strongest daily advance since early April.
  • Higher US inflation reinforced expectations of prolonged restrictive Federal Reserve policy.
  • US CPI rose 0.6% month-on-month in April, while annual inflation accelerated to 3.8%.
  • Persistent uncertainty around the fragile Iran ceasefire supported demand for defensive assets.
  • Euro weakened against the dollar as investors reassessed interest rate expectations and geopolitical risks.

• Oil climbed for third straight session as US–Iran deadlock deepened
  • Brent crude rose 3.4% to settle at $107.77 per barrel, while WTI gained 4.2% to $102.18.
  • Prices extended gains as disagreements between the US and Iran raised fears of prolonged supply disruption.
  • Markets remained concerned that stalled negotiations would keep the Strait of Hormuz largely restricted.
  • Continued uncertainty over energy flows supported a higher geopolitical risk premium in oil.
  • Both benchmarks had already surged sharply in the previous session amid ceasefire concerns.
  • Traders remained focused on the risk of sustained disruption to global oil and LNG shipments from West Asia. 

Day’s Ledger*

Economic Data

• US April Core PPI
• US weekly Cushing Crude Oil Inventories

 

• Corporate Actions
• Earnings: Andhra Cements, Bharti Airtel, Bharti Hexacom, Capital Small Finance Bank, CARE Ratings, Cipla, Crompton Greaves Consumer Electricals, DCM Shriram, DLF, GlaxoSmithKline Pharmaceuticals, Hindustan Petroleum Corporation, LIC Housing Finance, Oil India, Power Finance Corporation, Sagar Cements, Tata Motors, and TVS Motor Company

 

Policy

• German Buba Vice President Buch Speaks
• BoE MPC Member Mann
• BoE MPC Member Mann
• US FOMC Member Kashkari Speaks

Tickers to Watch

• ARCHEAN CHEMICAL: Arm signed pact with ISM for ₹20.67 billion semiconductor facility in Bhubaneswar targeting annual production of 60,000 wafers and 96 million devices.
• CROMPTON GREAVES CONSUMER ELECTRICALS: Expanded B2C lighting portfolio with launch of new B22 lamp holder.
• IIFL CAPITAL: Incorporated new subsidiary at the International Financial Services Centre.
• INTELLECT DESIGN: Signed digital banking agreement with 37 Canadian financial institutions covering 260,000 members and CAD 11.7 billion in assets.
• INTERARCH BUILDING SOLUTIONS: Received ₹1.02 billion contract for design, engineering, supply and erection of pre-engineered steel building system.
• KALPATARU: Board approved demerger of KRVPL mall business into KPTPL and merger of five group entities into Kalpataru Ltd.
• NEPHROCARE HEALTH: Arm signed pact with Orani Hemodialysis to acquire a dialysis centre for PHP 89.6 million.
• PNC INFRATECH: Executed settlement agreement with NHAI for one-time settlement of ₹2.35 billion under Vivad Se Vishwas II scheme.
• RVNL: Emerged as L1 bidder for ₹2.21 billion railway contract from South East Central Railway, Bilaspur.
• TATA CAPITAL: NBFC allotted two NCD tranches worth ₹5.05 billion and ₹7.65 billion on a private placement basis.
• TATA CONSUMER PRODUCTS: Fixed May 25 as record date for dividend payout.
• TEXMACO RAIL & ENGINEERING: Secured ₹40.45 billion order from Tsiko Africa Logistics for freight wagons, locomotives, components and long-term maintenance.
• UNITED BREWERIES: Maharashtra Sales Tax Tribunal reduced ₹2.75 billion tax demand order to nil.
• VODAFONE IDEA: Board to consider Q4FY26 results and proposal for fundraising via equity shares and/or warrants on May 16. 

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