Asia Equities Mixed; AI Spend Anxiety Trumps Iran Peace Progress

Here’s your quick read to start the day: a chatty, no-fuss look at overnight moves, the big story, what’s on the docket, and the tickers you need to watch.

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By Richard Fargose

June 25, 2026 at 2:20 AM IST

GLOBAL MOOD: Cautiously Risk On
Drivers: Weak US Housing Data, Fed Hike Bets Lift Dollar, Markets Split on AI and Oil Relief

Asian equities traded mixed as investors digested the sharp global selloff in technology and semiconductor stocks, with MSCI Asia-Pacific ex-Japan slipping 0.02%. South Korea's Kospi rebounded 2.2% after Tuesday's 10% plunge — its sharpest single-day decline since March — while Japan's Nikkei dipped 0.8%.

Risk sentiment remained fragile following Wall Street's decline on concerns over debt-funded AI spending and a more hawkish Fed, with Treasury yields falling as investors rotated into safer assets. Ongoing US-Iran negotiations and the continuation of the ceasefire helped contain broader risk aversion, though conflicting messages on nuclear inspections and growing political opposition in Washington underscored the fragility of the peace process.

THE BIG STORY
US Secretary of State Marco Rubio visited the UAE and Kuwait on Wednesday, working to reassure Gulf allies increasingly sceptical of the framework deal struck with Iran last week. Key sticking points include a proposed $300 billion reconstruction fund for Tehran and the partial lifting of sanctions, terms that have raised concerns among regional partners about their own security. Rubio sought to address those anxieties directly, meeting with leaders in both countries and discussing safe passage through the Strait of Hormuz, a critical waterway for Gulf economies. The diplomatic tour underscores how Washington's bid to sell the accord extends well beyond Tehran, requiring sustained reassurance of longstanding West Asian partners wary of a rehabilitated Iran.

Meanwhile, the war in Ukraine entered a new phase of escalation as President Volodymyr Zelenskiy announced orders for preemptive strikes on facilities Russia is using to sustain its war effort. Ukrainian drones knocked out power across Crimea's largest city and hit targets in central and southern Russia, compounding a deepening fuel crisis as Kyiv continues targeting refineries and energy infrastructure. Zelenskiy framed the expanded offensive as a pressure campaign aimed at forcing Moscow to the negotiating table, signalling that Ukraine intends to intensify its military posture rather than wait for diplomacy to take hold.

Data Spotlight
US new home sales fell 7.3% month-on-month in May to a seasonally adjusted annual rate of 580,000, the lowest in four months and well below forecasts of 640,000, marking a second consecutive monthly decline as higher mortgage rates weighed on buyers. Sales plunged 26.9% in the West and fell 4.1% in the South, while the Midwest gained 16.2%. Housing supply rose to 10.3 months, the highest since 2009, as the median sales price edged up to $424,900.

The US current account deficit widened to $226.8 billion in Q1 2026 from $221.1 billion in Q4 2025, despite tariff measures and higher energy export revenues tied to the West Asia conflict. The primary income account swung to a deficit of $13.3 billion from a surplus of $3.4 billion, as investment income debits surged. Partially offsetting the widening, the goods deficit narrowed to $250.9 billion and the services surplus widened to $85.1 billion.

Takeaway: The US housing market continued to weaken, with new home sales falling for a second month and supply hitting a 17-year high, as elevated mortgage rates and affordability pressures persist. A widening current account deficit and a hawkish Fed further underline the challenging macro backdrop, with meaningful relief for consumers and markets unlikely in the near term.

WHAT HAPPENED OVERNIGHT

US stocks mixed as falling oil lifts travel stocks but tech valuations weigh
- The Dow rose 0.35% while the S&P 500 lost 0.10% and Nasdaq fell 0.43% as tech weakness offset gains elsewhere.
- The S&P 500 airlines index surged 5.2% as oil fell to its lowest since the start of the Iran war, with Trump confirming Iran had dropped toll demands on Hormuz.
- Homebuilders soared after Trump cancelled affordable housing legislation, with Hovnanian up 11.3%, PulteGroup up 7.2%, and Toll Brothers up 6.7%.
- Micron closed down 0.3% but jumped in extended trading after quarterly revenue and Q4 forecasts beat Wall Street estimates.
- Cerebras tumbled 19.6% after forecasting margin compression and as OpenAI announced its own in-house inference chip, Jalapeño.
- Hertz sank 40.7% after flagging Q2 earnings near the low end of guidance and announcing a $100 million stock offering.
- Concerns over debt-funded hyperscaler AI spending have erased more than $1 trillion in Nasdaq 100 market value this week.
- Traders are now adding bets on a second Fed hike by December, with Thursday's PCE report the next key inflation read.
US Treasury yields fall for a second session as oil retreat eases inflation concerns
- The 10-year yield dipped to 4.45% as easing West Asia tensions drove oil prices lower, with Brent retreating to pre-conflict levels.
- Trump confirmed Iran had informed the US that no tolls, insurance fees, or charges would be imposed on vessels transiting the Strait of Hormuz.
- Markets still price a 68% probability of a Fed hike in September, up sharply from 29% a week ago, following Warsh's hawkish tone.
- Thursday's PCE report is the next key focus for clues on the inflation outlook and the path of monetary policy.
Dollar extends winning streak to highest since March 2025 on Fed hike bets
- The dollar index climbed above 101.7, its highest since March 2025, on track for its longest winning streak in over a month.
- Markets price a 68% probability of a September Fed hike, up from 29% a week ago, keeping the dollar broadly supported.
- Equity market volatility added to safe-haven demand, with the dollar advancing against the euro, pound, and Swiss franc.
- Resilient US economic activity and inflation expected to remain well above target reinforce the case for a more hawkish Fed relative to other major central banks.
- The dollar has gained 3.5% year-to-date
Oil falls over 4% to pre-war lows as Hormuz flows surge and supply concerns ease
- Brent settled at $73.74 per barrel, down 4.3%, and WTI at $70.34, down 3.9%, with Brent touching its lowest since February 27, the day before US-Israeli strikes on Iran.
- Around 20 million barrels of crude exited the Strait of Hormuz in the last 24 hours, with flows now similar to pre-war levels aided by military escorts.
- The US Energy Secretary said Iran will not have the ability to block the strait going forward, with Washington committed to ensuring flows even without a final deal.
- Oman said it would keep the strait open without tolls and designated two temporary routes to facilitate safe vessel passage.
- Brent flipped into contango for the first time since the war, with second-month prices trading above prompt delivery, signalling increased near-term supply.
- Total US crude stocks, including the Strategic Petroleum Reserve , fell to 743.3 million barrels, the lowest since 1984, as strong refining demand and SPR releases kept inventories tight.
- J.P. Morgan cut its H2 2026 Brent forecasts, seeing Q3 at $86 per barrel and Q4 at $80 per barrel, citing softer demand and lower-than-expected inventory draws.
- Moscow's oil refinery is expected to remain offline for at least six months following extensive damage from Ukrainian drone attacks.

Day’s Ledger*

Economic Data

GfK German July Consumer Climate Index
US January-March GDP
US Weekly Jobless Claims Data
US May PCE Price index
RBI Weekly Gilt Auction

Corporate Actions

Finkurve Financial Services board to consider fund raising options
Ganga Forging board to consider fund raising options
Magellanic Cloud board to consider fund raising options
Suryoday Small Finance Bank board to consider fund raising options

Policy

US FOMC Member Bowman Speaks
ECB Economic Bulletin
ECB's Lane Speaks

Tickers to Watch

BHARAT FORGE completed the acquisition of a 90% stake in RS Aerostructures through subsidiary BF Industrial Solutions, making it a step-down subsidiary.
BHARTI AIRTEL was upgraded by S&P to BBB+ from BBB, supported by strong earnings growth, deleveraging and improving business prospects in India and Africa.
CREDITACCESS GRAMEEN allotted non-convertible debentures worth ₹3.25 billion on a private placement basis.
EMBASSY DEVELOPMENTS signed an MoU with the Uttar Pradesh government for a proposed commercial real estate project in Lucknow involving an estimated investment of ₹15 billion.
HCLTECH announced partnerships with Neste and Nokia to expand AI-led solutions and signed an MoU with Nagpur Municipal Corporation to develop technology-driven sports initiatives.
IRFC will see the government exercise the 1% greenshoe option in its OFS after the issue was subscribed 1.86 times on the first day of bidding.
LIC said CFO Sunil Agrawal has resigned and will step down effective July 14 to pursue other opportunities.
NLC INDIA said subsidiary NLC India Renewables signed a joint venture agreement with OREDA for green energy projects in Odisha.
OBEROI REALTY clarified that reports regarding RERA approval for its Gurugram project reflect only project registration, with the final certificate yet to be issued.
RAYMOND clarified reports on a potential acquisition of German aerospace firm Deharde are speculative, while noting ₹3.31 billion from its preferential issue has been earmarked for potential M&A opportunities.
RELIANCE INDUSTRIES said its step-down subsidiary Karkinos Healthcare has completed HPV DNA screening for over 100,000 women across India.
TATA STEEL infused ₹16.25 billion into wholly owned subsidiary T Steel Holdings Pte. Ltd. as part of its broader investment and overseas restructuring programme.
VEDANTA incorporated a wholly owned subsidiary, Vedanta Property Platforms, to undertake real estate and related businesses.

Must Read

(*Compiled from various media sources)

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