Asia Rises on Cautious Risk-on as US-Iran Talks Hopes Build

GLOBAL MOOD: Cautiously Risk-On
Drivers: Negotiation Uncertainty 

Asia-Pacific markets opened with a measured risk-on tone on Tuesday, supported by easing oil prices and tentative hopes of renewed diplomacy, even as underlying geopolitical tensions persisted. Gains came despite sharp rhetoric from both sides, with Donald Trump warning of escalation if a deal is not reached before the ceasefire expiry, while Iran signalled resistance to negotiations under pressure.

Investor sentiment was lifted by expectations of a possible second round of talks in Pakistan, although uncertainty over Iran’s participation kept the outlook fragile. Oil prices, including WTI Crude and Brent Crude, edged lower, reflecting hopes that supply disruptions through the Strait of Hormuz may be avoided in the near term.

Markets are effectively pricing in a narrow path toward de-escalation, but the focus on uranium enrichment and control over key energy routes highlights deeper structural risks. As a result, while risk appetite has improved at the margin, volatility remains elevated, with sentiment highly sensitive to negotiation outcomes. 

TODAY’S WATCHLIST
 - US Retail Sales
 - ECB Guindos Speech
 - Jan-Mar Earnings: HCL Tech, Nestle India

THE BIG STORY
Iran is weighing participation in fresh talks with the US in Pakistan, but uncertainty remains high as both sides trade accusations of ceasefire violations ahead of the truce expiry. While diplomatic channels remain open, Tehran has signalled reluctance to negotiate under pressure, particularly after the US blockade and recent maritime tensions. US President Donald Trump is pushing for a deal to stabilise markets and prevent another spike in oil prices, but the absence of confirmed participation from Iran underscores the fragile state of negotiations.

At the core of the talks is a shift in negotiating priorities, with increasing focus on uranium enrichment limits and control over the Strait of Hormuz rather than broader regional security issues. Iran appears to be leveraging its influence over the strategic waterway—which carries around 20% of global oil flows—to extract concessions, including sanctions relief and strategic flexibility on its nuclear programme. This marks a move towards managing, rather than dismantling, geopolitical risks tied to energy supply.

For global markets, the outcome of these negotiations is critical. While a limited agreement could ensure continued flow through Hormuz and stabilise energy prices, it may fall short of addressing deeper structural risks in the region. Gulf nations remain cautious, warning that such an approach could entrench Iran’s strategic leverage, leaving long-term energy security and geopolitical stability unresolved.

Data Spotlight
Eurozone construction output declined 1.9% year-on-year in February 2026, marking a second consecutive contraction, with building activity remaining the primary drag at -8.1%. Weakness persisted across major economies including Germany (-2.5%), France (-3.5%) and Spain (-10.2%), although Italy showed modest growth. On a monthly basis, output slipped 0.2%, indicating continued softness in the sector and reflecting broader demand challenges.

In contrast, inflation in Canada accelerated to 2.4% year-on-year in March from 1.8%, driven largely by energy prices as global supply disruptions fed through. Energy inflation rose to 3.9%, pushing transportation costs higher, while headline CPI increased 0.9% month-on-month amid a sharp rise in gasoline prices.

Takeaway:
Weak construction activity in Europe signals slowing growth, while energy-driven inflation pressures remain evident globally, reinforcing the uneven macro backdrop.

WHAT HAPPENED OVERNIGHT

• US stocks slip as renewed tensions weigh on sentiment
  • Dow Jones declined 0.01%, S&P 500 fell 0.24%, and Nasdaq dropped 0.26%.
  • Markets paused after three weeks of gains amid fresh US–Iran tensions.
  • Uncertainty around ceasefire durability and peace talks in Pakistan weighed on risk appetite.
  • Communication services underperformed, with Meta down 2.6% and Netflix falling 2.5%.
  • Netflix extends losses following recent earnings and leadership changes.
  • QXO declined 3.1% after announcing a $17 billion acquisition, while TopBuild surged 19.4%.
  • Overall sentiment cautious as geopolitical risks resurface.

• US Treasury yield steady near lows as escalation risks offset policy expectations
  • The 10-year yield holds around 4.25%, near one-month lows.
  • Yields remain anchored as renewed US–Iran tensions drive cautious positioning.
  • Seizure of Iranian vessel and retaliation threats raise escalation concerns.
  • Uncertainty over upcoming talks ahead of ceasefire expiry keeps risk elevated.
  • Oil prices edge higher, sustaining inflation concerns and limiting downside in yields.
  • Focus shifts to Fed leadership outlook, with Kevin Warsh seen as relatively dovish.

• US Dollar steady as escalation risks offset inflation support
  • The US dollar index holds around 98.1, near pre-conflict levels.
  • Early gains fade as markets weigh renewed US–Iran tensions.
  • Seizure of Iranian vessel and retaliation threats support safe-haven demand.
  • Uncertainty over talks ahead of ceasefire expiry keeps sentiment cautious.
  • Oil prices edge higher, sustaining inflation concerns,
  • Rate outlook and inflation risks provide underlying support to the dollar.

• Oil jumps as renewed tensions revive supply disruption fears
  • Brent crude prices rise 5.64% to $95.48 per barrel, while WTI gained 6.87% to $89.61.
  • Rebound follows sharp 9% decline in previous session as markets reassess ceasefire durability.
  • Gains driven by renewed violence around Strait of Hormuz, raising supply disruption concerns.
  • Uncertainty over US–Iran peace talks add to volatility and risk premium.
  • Price action reflects rapid re-pricing of geopolitical risks after brief supply relief.

Day’s Ledger*

Economic Data

• US Retail Sales

Corporate Actions

• Jan-Mar Earnings: 360 One, Cyient DLM, HCL Tech, Nestle India, Sunteck Realty, Transformers and Rectifiers, Tata Elxsi, Tata Investment

Policy

• ECB Guindos Speech

Tickers to Watch

• Maruti Suzuki retires Ignis; supply woes hit S-Presso and WagonR
• Vedanta sets May 1 as record date for long-awaited demerger plan
• HPCL delays refinery inauguration after fire at Rajasthan project site
• Vedanta revised JAL bid after learning evaluation standing: Lenders
• In uncertain times, travel platform Thomas Cook launches visa insurance
• Jindal Stainless enters retail, expands into construction value chain
  

Must Read

• Trump says Israel did not push US into Iran war, cites nuclear threat
• RBI partially eases rupee NDF curbs on banks after market stability
• India expands Russian insurer list as Iran conflict disrupts oil flows
• No decision yet for next round of negotiations with US, says Iran
• Let the rupee move freely: RBI intervention risks more harm than good
• Outbound FDI surged 27.5% in March to $7 billion, shows RBI data

(*Compiled from various media sources)