Asia Shares Climb on Chip Rally; Oil Surge, Gulf Tensions Cap Gains

Global Mood: Cautiously Risk-On

Asian markets climbed on Thursday as semiconductors got a respite from heavy selling, with MSCI's broadest Asia-Pacific index rising 0.8% and regional sentiment lifted by a chip rally after reports that China plans to allow its top AI firms to buy a limited number of Nvidia's H200 chips. Japan's Nikkei 225 surged 2.3%, breaking a three-day losing streak, while South Korea's KOSPI jumped 3.8%, driven by a 3.6% rise in Samsung and a 7.5% surge in SK Hynix as investors bought into the recent selloff in chipmakers. Hong Kong's Hang Seng Index also gained sharply on renewed buying in technology shares, while China's Shanghai Composite slipped modestly.

Australia's ASX 200 bucked the trend, falling 0.83% and standing out as the regional laggard. Gains across the broader region were capped by a surge in oil prices, which rose for a third straight session after President Trump declared the interim agreement with Iran "over" and the U.S. military launched fresh strikes for a second consecutive day to reopen the Strait of Hormuz. Trump later said he did not expect a return to full-fledged war, helping soothe some concerns, though geopolitical risks in the Gulf remained firmly in focus. Bond markets took a beating, with Japan's 10-year JGB yield hitting a 30-year high, reflecting growing inflation fears amid the oil price surge.

Drivers: US-Iran Ceasefire Collapses, Fresh Strikes Escalate

THE BIG STORY

The US-Iran ceasefire effectively collapsed Wednesday as Trump declared the interim accord "over" and ordered a second, larger wave of strikes on Iran — targeting Bandar Abbas and other southern coastal cities, knocking out power in some areas — in retaliation for Tuesday's tanker attacks and Iranian strikes on US military bases in Bahrain and Kuwait. The escalating tit-for-tat left Trump with few good options: facing domestic political and economic pressure to avoid a return to full-scale war, yet unable to let Iranian attacks on Hormuz shipping go unanswered. An adviser to Iran's Supreme Leader threatened severe retaliation, raising the prospect of further escalation. Oil markets surged on the breakdown, with Strait of Hormuz control now the central flashpoint of a conflict that had briefly appeared to be winding down.

On the margins of the NATO summit in Ankara, Trump offered Ukraine a significant concession, announcing a licence for Kyiv to manufacture Patriot missile interceptors domestically — a long-sought capability that would reduce Ukraine's dependence on US supply chains for its most critical air defence weapon. Trump praised Zelenskiy in notably warm terms, a sharp departure from past criticism, and said he expected to speak with Putin soon, with a meeting on the horizon. Analysts cautioned that Ukraine needs interceptors now rather than the time it would take to establish domestic production, but the announcement nonetheless marked a meaningful shift in Washington's posture toward Kyiv.

Data Spotlight

FOMC minutes from June showed Fed officials divided on the rate outlook, with a few arguing for hikes given elevated inflation risks tied to AI demand, the West Asia conflict and tariffs. Most participants saw scenarios where policy firming would be needed to return inflation to 2%, though under their baseline outlook, many expected rates to end the year at or slightly below current levels of 3.50%-3.75%.

The Manheim Used Vehicle Value Index edged up just 0.1% month-on-month in June, slowing from 0.3% in May, as the post-tax-refund season normalised. Year-on-year prices rose 2.1%, down from 3.6% in May, with EVs gaining 12% annually while SUVs and pickups saw modest declines.

The average 30-year fixed mortgage rate edged up to 6.58% in the week ending July 3, remaining near nine-month highs, as Treasury yields rose on persistent inflation concerns and growing bets on Fed hikes. Total mortgage applications fell 2.2%, with refinancing activity dropping 4.1% and purchase applications down 0.6%.

Takeaway: Divided Fed minutes and sticky mortgage rates near nine-month highs reinforce a higher-for-longer rate environment, even as used car price growth slows and the labour market cools. With inflation risks still skewed to the upside, the bar for Fed easing remains high heading into the second half of 2026.

WHAT HAPPENED OVERNIGHT

US stocks end mixed as Trump declares Iran deal 'over', rattling investor sentiment

• The S&P 500 fell 0.28%, and Dow dropped 1.09%, while the Nasdaq edged up 0.20% as chip stocks partially offset broader weakness.
• Trump said at the NATO summit in Turkey that the Iran interim deal was "over" and warned of additional strikes, marking the latest false start in the back-and-forth peace process.
• Nine of 11 S&P 500 sectors declined, with travel stocks hit hard as surging oil prices stoked fuel cost concerns, sending United Airlines, Delta, Carnival, and Norwegian Cruise Line lower.
• Broadcom rallied 4.8% after Apple announced plans to spend more than $30 billion on chips as part of their supply agreement, helping keep the Nasdaq positive.
• Nvidia rose 3.65% after reports that China plans to allow its top AI firms to buy a limited number of H200 chips, lifting the PHLX chip index 2.23%.
• Microsoft, Alphabet, and Meta each fell more than 1%, while SpaceX dropped to its lowest close since its June 12 debut.
• FOMC minutes showed inflation worries mounted at last month's meeting, with officials following Warsh's lead toward a more stripped-down policy statement, keeping a December rate hike in play.
• The IMF cut its 2026 global growth forecast to 3%, citing ongoing risks from the West Asia war.
  
  

US Treasury yields rise to highest since May as Iran escalation fans inflation fears

• The 10-year yield climbed to 4.60%, its highest since May, as surging fuel prices from renewed US-Iran attacks amplified the Fed's hawkish backdrop.
• FOMC minutes from June showed a few policymakers cited higher core inflation and a robust labour market as making the case for a rate hike.
• Rate futures reflect a loose consensus of one Fed hike this year, though nearly half the market is positioned for more than one move.
• Bonds faced additional pressure from Warsh's push to shrink the Fed's balance sheet by trimming longer-term note and bond holdings.
  
  

US dollar holds steady around 101 as Iran escalation revives inflation and rate hike concerns

• The dollar indexwas little changed at 101 as investors weighed Trump declaring the ceasefire "over" and threatening fresh strikes and a port blockade on Iran.
• The US launched new strikes on Iran and revoked its crude oil sales waiver, following a series of tanker attacks in the Strait of Hormuz.
• Surging oil prices pushed September Fed hike odds to 69%, up sharply from 58% the prior day, as inflation concerns resurfaced.
• FOMC minutes revealed policymakers were divided on the rate path ahead, discussing a range of economic scenarios amid the evolving energy shock.
  

Oil settles nearly 5% higher as Trump declares Iran deal 'over' and threatens fresh strikes

• Brent settled at $78.02 per barrel, up 5.2%, its highest since June 19, and WTI at $73.52, up 4.4%, its highest since June 22, before pulling back from intraday gains of nearly 9% after Trump ruled out full-fledged war.

• Trump said the interim MOU was "over" following Iranian attacks on US Gulf bases and Hormuz tankers, with fresh US strikes expected, though analysts noted the latest flare-up has likely put a ceiling on vessel movements through the strait.

• The renewed escalation significantly weakens confidence that the 60-day truce can still evolve into a permanent peace agreement, Rystad Energy said.

• US ultra-low sulphur diesel futures soared over 14% intraday after Russia banned diesel exports to support its domestic fuel market following systematic Ukrainian drone attacks on refineries.

• Ukrainian drones struck three Russian oil refineries, tankers on the Sea of Azov, and pipeline pumping stations in a major night of strikes ranging from the Ukrainian border to the Urals.

• The diesel price spike pushed the US 3-2-1 crack spread to a record high, according to LSEG data going back to 2001.

• US distillate stocks fell nearly 5 million barrels last week on strong domestic demand and high exports, while crude stocks posted a surprise increase.

Day’s Ledger* 

Economic Data

• China June CPI (MoM)

• German May Trade Balance 

• Eurogroup Meetings

• ECB Publishes Account of Monetary Policy Meeting

• US Initial Jobless Claims

• Russia Central Bank reserves (USD)

• US June Existing Home Sales

• US 30-Year Bond Auction

Corporate Actions

• Asian Hotels (East) to consider dividend

• Anand Rathi Wealth financial results

• Aqylon Nexus Limited to consider fund raising

• Country Condo's to consider fund raising

• Eimco Elecon (India) financial results

• Expleo Solutions to consider dividend 

• GM Breweries financial results

• Supreme Infrastructure India financial results

• Tata Consultancy Services to consider dividend

• Tata Consultancy Services financial results

Policy

• US FOMC Member Williams Speaks

• US Fed Logan Speaks

Tickers to Watch

STATE BANK OF INDIA: Subsidiary SBI Funds Management files RHP for IPO comprising OFS of up to 20.37 crore shares (10.00% stake) — 12.83 crore shares (6.30%) by SBI and 7.54 crore shares (3.70%) by Amundi India Holding; issue opens July 14, closes July 16, 2026.

SML MAHINDRA: June 2026 CV sales rise 4.9% YoY to 1,896 units (vs 1,807); production up 2.7% YoY to 1,587 units; exports fall 46.9% YoY to 34 units.

NALCO / NLC INDIA: Sign 50:50 JV agreement to develop 1,080 MW (4x270 MW) captive thermal power plant at Angul, Odisha, supporting NALCO's aluminium smelter expansion.

IRB INFRASTRUCTURE: June 2026 toll collections rise 28% YoY to ₹8.08 billion (vs ₹6.31 billion).

HFCL: Launches OptiQ AI™ brand for end-to-end optical connectivity portfolio targeting AI, cloud and hyperscale data centres, covering fibre cables, assemblies, patch cords, trunks, cassettes and enclosure panels.

TVS MOTOR COMPANY: Partners with Indian Oil Corporation to deploy TVS King Kargo HD vehicles across IndianOil's LPG distributor network for last-mile cylinder delivery.

TATA STEEL: Q1 FY27 India crude steel production up 11% YoY to 5.82 MT; deliveries up 9% YoY to 5.17 MT; Automotive & Special Products and Branded Products & Retail post highest-ever Q1 volumes; Tata Tiscon up 33% YoY, Tata Steelium up 41% YoY.

INDIAN BANK: Shareholders approve fundraising of up to ₹50 billion, including premium, via QIP, FPO or rights issue.

PHOENIX MILLS: Q1 FY27 retail consumption up 32% YoY to ₹47.27 billion; office occupancy improves to 72% (vs 70% in March 2026) with 1.9 lakh sq ft leased; residential sales at ₹640 million, collections at ₹510 million.

JSW ENERGY: Commissions 1,081 MW renewable capacity since April 2026, taking total installed capacity to 14,535 MW; renewables now 61% of portfolio; on track to add 3 GW renewable capacity in FY27.

Must Read

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Messi Didn't Beat Ronaldo, the Story Did

IMF lowers 2026 global growth forecast to 3%, sees rebound in 2027

Meta Doesn’t Need CRED’s Loan Book. It Wants the Borrower Signal

Q1FY27 earnings preview: Will West Asia war dent India Inc.'s fortunes?

India may allow agentic AI-led UPI transactions under new NPCI protocol

Australia's largest pension fund invests A$500 million in India's infrastructure fund

Gold dips as Mideast hostilities revive inflation concerns

(*Compiled from various media sources)

See you tomorrow with another edition of The Morning Edge.

Have a great trading day

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