Risk-On Returns to Asia as Trump Signals Iran Conflict May End Soon

GLOBAL MOOD: Cautious Risk-On
Drivers: Trump hints at war ending, Hormuz reopening, Possible Russian sanctions relief

Asian equity markets staged a strong rebound, signalling a risk-on shift after US President Donald Trump said the conflict with Iran could end “very soon,” easing fears of a prolonged energy shock.

South Korea’s Kospi jumped about 6% while Japan’s Nikkei rose roughly 3%. The rally was supported by a sharp retreat in crude prices after Brent fell around 10% to about $89 a barrel, well below Monday’s spike above $100.

Markets also drew comfort from discussions among G7 nations on a potential coordinated release of emergency oil reserves to stabilise energy markets.

TODAY’S WATCHLIST
 - China Balance of Trade
 - India AMFI Data

THE BIG STORY
Markets experienced significant volatility on Monday following statements by President Trump, who predicted that the conflict in West Asia would conclude rapidly, while simultaneously insisting on Iran's unconditional surrender and stating that the appointment of new Supreme Leader Mojtaba Khamenei was "unacceptable." Iranian hardliners demonstrated their support for the 56-year-old cleric, who maintains substantial influence within the Revolutionary Guards and associated business interests, indicating that Tehran is not preparing to yield. President Trump asserted that the conflict would persist until Iran is "totally and decisively defeated," yet did not specify the criteria for victory, resulting in market activity driven more by sentiment than by concrete developments.

Trump also reported a "very good call" with Putin, who proposed a "quick political and diplomatic end to the Iranian conflict" through his foreign policy aide. Trump used the call to press Putin to help end the Ukraine war, acknowledging "tremendous hatred" between Putin and Zelenskiy but expressing hope for progress. The Putin diplomatic intervention adds a new dimension to the conflict's potential resolution, with Russian sanctions relief on oil already being floated as a tool to tame energy prices.

In a separate development, Anthropic filed a lawsuit to block the Pentagon from placing it on a national security blacklist, calling the designation "unprecedented and unlawful" and arguing it violated the AI lab's free speech and due process rights. The filing escalates a high-stakes battle between one of America's leading AI companies and the US military over technology usage restrictions.

Data Spotlight
Japan's October-December GDP was revised sharply higher to 1.3% annualised growth from the paltry 0.2% preliminary estimate, driven by stronger-than-expected business investment and beating the 1.2% median forecast. On a quarterly basis, the economy grew 0.3%, a meaningful upgrade that paints a more resilient picture of Japan's economy heading into 2026, even as the West Asia conflict casts a long shadow over the outlook for an energy-dependent economy.

In the US, one-year-ahead inflation expectations eased to 3% in February to a seven-month low with consumers expecting slower price growth in food, medical care, and rent. However, gas price expectations jumped 1.3% to 4.1%, reflecting the early impact of the West Asia conflict on consumer psychology, while longer-term three and five-year inflation expectations held steady at 3%.

Takeaway:
Japan's GDP improvement stands out amid an otherwise weak week, indicating stronger-than-expected economic momentum entering 2026. Meanwhile, US consumer gas price expectations have surged even before major oil market moves, showing the West Asia energy shock is influencing inflation outlooks and complicating the Fed's rate communications.

 

WHAT HAPPENED OVERNIGHT

• US stocks stages dramatic late reversal as Trump signals imminent end to Iran war
  • The S&P 500 gained 0.9%, Nasdaq surged 1.3%, and the Dow rose 0.5% after a stunning final-hour comeback from steep intraday losses.
  • Trump's suggestion that the war was "very far ahead" of his four-to-five-week timeline and that the Strait of Hormuz was reopening triggered the reversal.
  • WTI collapsed to around $86/barrel from overnight peaks of $119, a extraordinary intraday swing that dismantled stagflation fears in real time.
  • Broadcom and AMD surged over 4.6% each, with semiconductors providing the key rally tailwind.
  • Wells Fargo and financial heavyweights remained soft, capping the broader upside.

• US Treasury holds at 4.13% as oil retreat from $100 offers brief relief
  • The 10-year Treasury yield settled at 4.13%, pulling back from an intraday high of 4.21% as oil retreated below $100/barrel.
  • The brief yield spike to 4.21% reflected markets pricing a genuine $100+ oil inflation scenario before Trump's "very complete" war comments eased pressure.
  • Kuwait, Iran, the UAE, and Saudi Arabia are all cutting output amid limited storage capacity and the continued Hormuz closure, a supply shock of historic breadth.
  • The Strait of Hormuz remains shut, keeping the energy supply disruption structural rather than temporary.
  • Concerns persist that an energy-driven inflation surge could prevent the Fed from cutting rates even as the labour market deteriorates.
  • The 4.13% level reflects a market paralysed between inflation fear and recession risk, unable to price either scenario with conviction until the conflict trajectory becomes clearer.

• US Dollar pares gains as Trump signals war "very complete" but holds near 99.2
  • The US dollar index traded near 99.2, recovering from Friday's dip as oil climbed above $100 a barrel early in the session.
  • Trump told CBS the war against Iran is "very complete" and that the US is "very far ahead" of his initial four-to-five week timeline, easing fears of a prolonged conflict.
  • The comments triggered a brief dollar pullback as geopolitical risk premium was partially unwound.
  • The euro recovered to $1.1630 after earlier touching a three-month low of $1.1505, while the yen strengthened slightly after the dollar hit a six-week peak.
  • The dollar remains caught between safe-haven demand from the conflict and growth concerns from $90+ oil and deteriorating US payrolls.

• Crude oil surges to 2022 highs before reversing sharply on Trump-Putin call and Russia sanctions relief reports
  • Brent crude prices settled up 6.8% at $98.96/barrel and WTI gained 4.3% to $94.77,  both at their highest since 2022 at settlement.
  • Prices soared as much as 29% intraday as Saudi Arabia and OPEC members cut supplies amid the expanding US-Israeli war with Iran.
  • A Trump-Putin phone call triggered a sharp post-settlement reversal, with prices turning negative shortly after.
  • Reuters reported the Trump administration is mulling easing sanctions on Russian oil to flood markets and tame energy prices--sending crude down over 5% in post-settlement trade.

Day’s Ledger*

Economic Data

• China Balance of Trade
• US Existing Home Sales
• India AMFI Data
• India States bond Auctions

Corporate Actions

• Capri Global board to consider fund raising
• Tuni Textile board to consider fund raising 
• Vega Jewellers board to consider bonus share issue

Policy Events

• Eurozone Ecofin Meeting

Tickers to Watch

• Tech Mahindra denies layoff buzz, says no proposal under consideration
• Reliance Retail acquires Pahadi Local to scale beauty and wellness brand
• Puravankara enters Bengaluru joint development project worth ₹1,300 cr
• Hical Tech wins contract from Dassault to supply components for Rafale jets
• Reliance buys 6 million barrels of Russian oil for March, says report
• Torrent Power raises ₹20 billion via NCDs at 7.97% coupon through private placement
• Powergrid greenlights ₹50 billion loan, approves ₹2.34 billion substation security project
• Hinduja Global’s broadband arm partners with UP govt to connect 2 million homes

Must Read

• West Asia war: Remain calm amidst this storm, says Sebi chairman Pandey
• Iran sought permission to dock three warships at Indian ports: Jaishankar
• Trump says ending Iran conflict will be 'mutual' decision with Netanyahu
• Crude price rise may not substantially impact inflation: FM Sitharaman
• FinMin asks banks to step up efforts to reduce delays in IBC cases
• Saudi Aramco offers spot crude as war disrupts global oil supplies
• ECB volumes may rise 25-30% to nearly $65 billion in FY27, says Citi
• Supply disruption, high input costs likely to hit fertiliser companies

 

See you tomorrow with another edition of The Morning Edge.
Have a great trading day

Global markets are learning to price geopolitics first.

Chandrika Soyantar writes, for decades, investors assumed capital would flow to efficiency. Supply chains stretched across borders and markets largely treated politics as background noise. That assumption is fading as conflicts, sanctions, and strategic rivalries begin to shape how capital moves and how risks are priced.

Technology, energy, logistics, and finance are increasingly organised around political alignment and national security. Markets still move with economic cycles, but those cycles now unfold within boundaries defined by geopolitics.

(*Compiled from various media sources)