Asia Equities Edge Higher Despite Persistent Oil Risks

GLOBAL MOOD: Risk-Off
Drivers: Allies rebuff Hormuz escort call, Brent holds above $100

Asian equities opened higher on Tuesday, signalling a tentative risk-on mood after hopes grew that tanker traffic through the Strait of Hormuz could gradually resume, easing fears of a severe supply shock. Expectations that major economies may release strategic petroleum reserves also supported sentiment. However, the rebound remained fragile as Brent crude climbed back above $102 a barrel and US equity futures softened, highlighting lingering inflation and geopolitical risks. With the US–Iran conflict entering its third week and central-bank meetings approaching, investors remain cautious about the durability of the relief rally.

TODAY’S WATCHLIST
 - Reserve bank of Australia interest rate decision
 - FOMC 2-day Policy Meeting begins

THE BIG STORY
The US-Iran war entered its third week with no end in sight as US allies rebuffed Trump's call to send warships to escort tankers through the Strait of Hormuz. Germany, Spain, and Italy all declined, with German Chancellor Friedrich Merz explicitly citing the lack of a UN, EU, or NATO mandate and pointedly noting that Washington and Israel had not consulted Berlin before launching the war. Trump responded with sharp criticism, accusing Western partners of ingratitude after decades of US support. The refusals leave Washington increasingly isolated in its military campaign, with the Strait remaining largely closed by Iranian drones and naval mines and 20% of the world's oil and LNG flows severely disrupted for a third consecutive week.

On the diplomatic front, US Treasury Secretary Bessent, US Trade Representative Greer, and Chinese Vice Premier He Lifeng wrapped up two days of talks in Paris that sketched the framework for a highly anticipated Trump-Xi summit planned for early April. However, Trump signalled he may seek a month-long delay due to his obligations as wartime commander-in-chief, a postponement Bessent stressed would reflect military necessity rather than any failure by Beijing to meet US demands on Hormuz. The US-China relationship was described as stable, with Bessent firmly separating trade and shipping disputes from the summit timeline. The juxtaposition of allied rebuffs and simultaneous China engagement underscores the increasingly complex diplomatic landscape Washington is navigating as the West Asia conflict enters a new and more uncertain phase.

Data Spotlight
US industrial production rose 0.2% month-on-month in February above the 0.1% forecast and following January's strong 0.7% gain as manufacturing output advanced 0.2% and mining climbed 0.8%, offsetting a 4.7% drop in natural gas utilities. Capacity utilisation remained steady at 76.3%, remaining 3.1 percentage points below its long-run average suggesting meaningful slack in the industrial base even as output grows. The NY Empire State Manufacturing Index told a more cautious story, dropping sharply to -0.2 in March from 7.1 in February and missing the 3.2 forecast, as shipments declined and delivery times lengthened notably an early signal that West Asia supply chain disruptions are beginning to register in regional manufacturing conditions.

Takeaway:
February's industrial production increase reflects past conditions, before oil peaked at $100 and the Hormuz blockade took effect. The Empire State index's sharp drop in March, with longer delivery times and fewer shipments, signals worsening supply chain issues. Persistent low-capacity utilization shows the industrial recovery is too shallow for sustained energy shock.

WHAT HAPPENED OVERNIGHT

• US stocks rebounds as Hormuz tanker transit eases energy shock fears
  • The S&P 500 gained 1.1%, Nasdaq added 1.2%, and the Dow rose 1% as markets reassessed the risk of a lasting energy shock.
  • Select tankers successfully navigating the Strait of Hormuz over the weekend was the primary catalyst, signalling partial leniency in energy exports.
  • Oil retreating from recent peaks triggered a rotation back into credit-sensitive sectors, with tech and banks both recording gains.
  • Nvidia rose 1.6%, Micron jumped 3.7% ahead of its earnings report, and Meta climbed 2.3% on reports of potential workforce restructuring.
  • Chip producers outperformed broadly, with AI implementation optimism providing a sector-specific tailwind independent of the geopolitical backdrop.
  • The rebound is encouraging but fragile. Tehran's denial of ceasefire talks and Brent holding above $100, suggest the relief rally is built on tentative rather than confirmed de-escalation.

• US Treasury yield eases to 4.24% as Hormuz tanker transit offers brief inflation relief
  • The 10-year Treasury yield ended down at 4 bps to 4.24%, partially unwinding last week's sharp 15 bps surge to four-week highs.
  • Treasury Secretary Bessent's confirmation that Iranian oil tankers can transit the Strait of Hormuz eased immediate inflation fears, providing the modest yield relief.
  • The US claims talk with Iran are underway while Tehran denies seeking a truce, keeping the conflict resolution timeline opaque.
  • All attention turns to the Fed's policy decision this week where rates are widely expected to hold, but Powell's assessment of the energy inflation shock will be closely parsed.
  • Markets are pricing only one 25 bps cut in 2026, likely not before December, a stark contrast to the multiple cuts priced just weeks ago.

• US Dollar eases from ten-month highs at 100 as Hormuz tanker transit offers partial relief
  • The US dollar index hovered around 100, easing slightly from ten-month highs as oil's modest pullback reduced safe-haven urgency.
  • Treasury Secretary Bessent confirmed the US is allowing Iranian oil tankers to transit the Strait of Hormuz, a significant policy signal that partially eased energy market tension.
  • Trump is actively urging other nations to help keep the waterway open, but multilateral support remains limited.
  • The US says it is in talks with Iran, Tehran has denied seeking a truce, keeping uncertainty firmly intact.
  • All eyes on the Fed's policy decision this week, no rate change expected, but markets will scrutinise policymakers' assessment of the energy-driven inflation spike.
  • Markets are pricing only one 25 bps cut in 2026, not before December, a dramatic reversal from the multiple cuts expected just weeks ago.

• Crude oil slips 3% as vessels transit Hormuz but allies rebuff Trump's unblocking call
  • Brent crude fell 2.8% to $100.21/barrel while WTI dropped 5.3% to $93.50/barrel as partial shipping resumption eased immediate supply fears.
  • Some vessels sailed through the Strait of Hormuz for the first time since the blockade began a tentative but significant development.
  • US allies rebuffed Trump's call for help in unblocking the strait, leaving Washington with limited multilateral support for a naval solution.
  • The IEA head signalled further strategic reserve releases are possible, adding a policy backstop to the modest price relief.
  • Despite the pullback, Brent held above $100, underscoring that the market views Hormuz reopening as partial and fragile rather than a definitive resolution.
  • WTI's sharper 5.3% decline reflects US-specific supply dynamics, with domestic inventory builds adding to the downward pressure.

Day’s Ledger*

Economic Data

• India States Bond uctions
• US Pending Home Sales

Corporate Actions

• Five-Star Business board to consider fund raising
• India Glycols board to consider interim dividend 
• ITL Industries board to consider proposal to transfer of shares
• PFC board to consider fund raising
• Vardhman Polytex board to consider fund raising

Policy

• Reserve bank of Australia interest rate decision
• BoE Evans Speech
• FOMC 2-day Policy Meeting begins

Tickers to Watch

• Tata Motors to raise commercial vehicle prices by up to 1.5% from April 1
• Reliance signs $3 billion green ammonia supply deal with Samsung C&T
• Fino Payments Bank denies links to betting and gaming activities
• JSW Steel unit eyes debut $1 billion short-term debt issue, says report
• Ola Electric plans stake sale to raise up to ₹20 billion for battery arm
• Vedanta plans to raise up to ₹25.75 billion via NCDs to diversify funding

Must Read

• India's merchandise trade deficit widens to $27.1 billion in February
• India exports to US fall 13% in Feb; China trade deficit crosses $100 bn
• No fuel shortage in India, refineries running at full capacity, says govt
• Trump may delay China trip over Iran war, not to pressure Hormuz: Bessent
• India has not discussed Hormuz ship transit with US bilaterally: MEA
• India to wait for new US tariff architecture before signing interim deal 

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See you tomorrow with another edition of The Morning Edge.

Have a great trading day

𝐀𝐫𝐞 𝐈𝐧𝐝𝐢𝐚’𝐬 𝐑𝐚𝐛𝐢 𝐜𝐫𝐨𝐩 𝐞𝐬𝐭𝐢𝐦𝐚𝐭𝐞𝐬 𝐭𝐨𝐨 𝐨𝐩𝐭𝐢𝐦𝐢𝐬𝐭𝐢𝐜?

India’s latest second advance estimate for 2025-26 projects record production of wheat, rapeseed/mustard and sugarcane. On paper, the numbers appear reassuring.

Yet a closer look at ground conditions raises questions.

Rising temperatures across key wheat-growing states, weak winter rainfall affecting soil moisture, and simple yield arithmetic for oilseeds suggest the harvest may not be as strong as the official projections imply.

𝐆. 𝐂𝐡𝐚𝐧𝐝𝐫𝐚𝐬𝐡𝐞𝐤𝐡𝐚𝐫 writes, whether early production estimates are running ahead of agronomic reality — and why traders and processors should treat them with caution.

The piece also situates the debate within a broader context: declining cotton and soybean output, structural pressures on pulses, and the growing role of climate volatility in shaping India’s farm outcomes.

With climatologists warning of a possible El Nino in the second half of 2026, the margin for forecasting errors in agriculture may only get smaller.


(*Compiled from various media sources)