Asian Equities Waver Amid Fresh West Asia Geopolitical Risks

GLOBAL MOOD: Cautiously Risk-On
Drivers: US-Iran Peace Response, Hormuz Shipping Resumption

Asian markets reflected a cautious risk-on tone, with equities trading mixed as investors balanced fresh geopolitical tensions against tentative signs of diplomatic progress in West Asia. Oil prices moved sharply higher after Israeli Prime Minister Benjamin Netanyahu warned that the conflict with Iran was “not over,” while US President Donald Trump rejected Tehran’s latest peace proposal, reviving fears of a prolonged disruption to global energy supplies. Brent crude climbed above $104 per barrel and WTI moved closer to $95, reflecting renewed geopolitical risk premium in energy markets.

Despite the escalation in rhetoric, investors found some comfort in continued diplomatic engagement between Washington and Tehran through Pakistani mediation channels. Markets also drew support from signs of gradual improvement in shipping activity, after a Qatari LNG vessel successfully crossed the Strait of Hormuz for the first time since the conflict began.

However, the broader mood remained fragile as unresolved disputes over Iran’s nuclear programme, sanctions relief and regional influence continued to cloud the outlook. The combination of elevated oil prices, geopolitical uncertainty and concerns over inflationary pressures kept overall market sentiment cautious.

THE BIG STORY
Iran submitted its response to the latest US peace proposal through Pakistani mediators, signalling that diplomatic engagement between the two sides remained active despite weeks of military confrontation. According to Iranian sources, the current phase of negotiations would focus primarily on halting hostilities and stabilising the region before addressing more contentious issues such as Tehran’s nuclear programme.

The latest mediation efforts appeared centred on reaching a temporary memorandum of understanding that could maintain the ceasefire, reopen shipping routes through the Strait of Hormuz and create space for broader negotiations. However, major disagreements over Iran’s nuclear ambitions and regional influence remained unresolved, suggesting that any agreement would likely be limited and transitional in nature.

In a significant development for energy markets, a Qatari LNG tanker successfully crossed the Strait of Hormuz for the first time since the conflict began earlier in the year, indicating tentative signs of improving maritime conditions. At the same time, regional security concerns persisted after Kuwait reported hostile drone activity in its airspace, highlighting the fragile nature of the ceasefire environment.

The combination of cautious diplomatic progress and partial resumption of shipping helped support hopes for easing energy disruptions, although investors remained alert to the risk of renewed escalation across West Asia.

Data Spotlight
US consumer sentiment deteriorated further in early May, with the University of Michigan’s index falling to a record low of 48.2, as households remained pressured by elevated fuel prices and broader cost concerns linked to the conflict in West Asia. Consumers continued to cite gasoline prices and tariffs as key drivers of financial stress, while perceptions of current buying conditions weakened sharply. Inflation expectations eased slightly but remained elevated.

At the same time, the labour market continued to show resilience. The US economy added 115,000 jobs in April, well above expectations, led by gains in healthcare, transportation and retail sectors. Although hiring moderated from March levels, the data marked a second consecutive month of employment growth, reinforcing the view that labour conditions remained relatively stable despite slowing momentum.

However, underlying labour indicators softened. Labour force participation fell to its lowest level since 2021, broader unemployment measures increased, and total employment declined. Wage growth also remained contained, with annual earnings growth easing below expectations.

Takeaway:
The US economy continued to benefit from resilient hiring trends, but weakening consumer confidence and softer labour participation highlighted growing pressure from higher living costs and geopolitical uncertainty.

WHAT HAPPENED OVERNIGHT

• US stocks hit record highs as ai rally outweighed geopolitical concerns
  • S&P 500 gained 0.84% while Nasdaq surged 1.71% to fresh record closes.
  • Dow Jones ended marginally higher as investors focused on strong earnings and resilient economic data.
  • Stronger-than-expected US jobs report reinforced confidence in labour market strength.
  • Nvidia rose 1.8%, while Micron Technology and Sandisk surged over 15% on continued AI data centre demand.
  • Investors largely looked past elevated oil prices and West Asia tensions.
  • Cloudflare plunged 24% after announcing workforce cuts and weaker guidance.
  • Expedia fell 9% after warning that conflict in West Asia was hurting travel demand.

• US Treasury yields eased as mixed economic signals offset geopolitical concerns
  • The US 10-year Treasury yield fell to 4.35%, nearing recent two-week lows.
  • Investors continued to monitor fragile US–Iran ceasefire developments in the Strait of Hormuz.
  • Marco Rubio said Washington expected Tehran’s response to the latest peace proposal.
  • Markets balanced geopolitical uncertainty against easing inflation concerns from softer oil prices earlier in the week.
  • US economy added 115,000 jobs in April, significantly above expectations.
  • Michigan consumer sentiment dropped to a record low, highlighting pressure on household confidence.
  • Investors continued to expect the Federal Reserve to keep rates largely unchanged through year-end.

• US Dollar weakened despite resilient labour market data
  • The US dollar index slipped below 98, reaching its lowest level in around ten weeks.
  • Stronger-than-expected US payrolls data failed to lift the greenback materially.
  • Unemployment rate remained steady at 4.3%, signalling continued labour market resilience.
  • Markets expected the Federal Reserve to remain cautious amid persistent energy-driven inflation risks.
  • Donald Trump said the ceasefire with Iran remained intact despite renewed clashes.

• Oil rose as renewed strikes offset hopes for ceasefire stability
  • Brent crude gained 1.2% to settle at $101.29 per barrel, while WTI rose 0.6% to $95.42.
  • Prices initially jumped as much as 3% after fresh US–Iran air strikes.
  • Markets remained focused on disruptions to shipping through the Strait of Hormuz.
  • Gains moderated later in the session amid hopes for a longer pause in hostilities.
  • Traders balanced geopolitical risks against signs that diplomacy efforts were still continuing.
  • Energy markets remained volatile as supply uncertainty persisted across West Asia. 

Day’s Ledger* 

Economic Data

• China April CPI Data
  
• US April Existing Home Sales Data
  
  

Corporate Actions

• Earnings: Anant Raj, Aurionpro Solutions, Canara Bank, GE Power India, Indian Hotels Company, JSW Energy, New India Assurance Company, PVR INOX, and UPL Ltd

Policy

• BoE Deputy Governor Woods Speaks
  
• German Buba Mauderer Speaks 

Tickers to Watch

• ABB INDIA Jan-Mar net profit surged to ₹17.84 billion from ₹4.75 billion YoY, though EBITDA margins contracted to 12.8%.
• BALKRISHNA INDUSTRIES Jan-Mar net profit declined 18.8% YoY to ₹3.00 billion despite revenue growth of 6.6% to ₹29.33 billion.
• BANK OF BARODA plans to raise up to ₹60 billion through Tier-I and Tier-II bonds; guided for 10–12% deposit growth in FY27, with Jan-Mar profit beating estimates and asset quality improving sequentially.
• BANK OF INDIA Jan-Mar net profit rose 14.9% YoY to ₹30.16 billion, while gross NPA improved to 1.98%.
• BRIGADE HOTEL to invest ₹10 billion in Karnataka over the next five years after completing 10 years of operations in Mysuru.
• FINO PAYMENTS BANK April accounts opened rose 9% YoY to 0.24 million; average deposits increased 13% to ₹28.01 billion, while loan-referral disbursals surged 204% to ₹1.66 billion.
• GHV INFRA received LoI for EPC work on a Cameroon tyre plant project worth about ₹70 billion.
• HEXAWARE TECHNOLOGIES said insolvency proceedings involving a Europe-based client are unlikely to have additional financial impact as provisions were already made.
• IRB INFRASTRUCTURE DEVELOPERS April toll collections rose 23.6% YoY to ₹7.95 billion.
• JSW INFRASTRUCTURE Jan-Mar net profit fell 17.9% YoY to ₹4.18 billion, while revenue increased 18.6% to ₹15.22 billion.
• LLOYDS METALS & ENERGY issued unsecured NCDs worth ₹7.50 billion on a private placement basis; issue fully subscribed.
• NHPC board to consider fundraising of up to ₹20 billion via bonds on May 15.
• NIVA BUPA HEALTH INSURANCE Jan-Mar net profit rose 65.6% YoY to ₹3.41 billion, with gross premiums written increasing 38.5% to ₹28.80 billion.
• OBEROI REALTY Jan-Mar net profit jumped 62.4% YoY to ₹7.03 billion, while revenue surged 52.1% to ₹17.50 billion.
• PB FINTECH subsidiary received SEBI approval to operate as a stock broker on NSE’s debt segment.
• SWIGGY Jan-Mar net loss narrowed to ₹8.00 billion from ₹10.81 billion YoY, while revenue jumped 44.7% to ₹63.83 billion.
• TATA CONSUMER PRODUCTS Jan-Mar net profit rose 20.7% YoY to ₹4.91 billion, while revenue grew 17.9% to ₹54.34 billion, ahead of estimates.
• TVS MOTOR launched the top-end variant of the TVS Ronin motorcycle in Sri Lanka.
• URBAN COMPANY Jan-Mar net loss widened to ₹1.61 billion from a profit of ₹30 million, despite revenue growth of 42.6% to ₹4.26 billion. 

Must Read

• Borrowed Dollars Won’t Fix India’s External Pressures
• Petroyuan’s Rise May Matter More Than Dollar’s Decline
• SBI’s Margin Squeeze Shows Why Rate Cuts Complicate Banking
• Capital Flows Cloud India's Growth Story Despite Sound Fundamentals
• How India Drifted From Edible Oil Self-Sufficiency to Dependence
• How China's evolving consumer habits may protect the Amazon rainforest
  
• Modi urges limits on fuel use, travel and imports to save forex
• Mexico president wavers on plan to cut school year by 40 days for the World Cup
  
• A Ratan Tata tradition is back to rejig operations at Bombay House
• Big banks urge RBI to rethink uniform forex exposure cap

See you tomorrow with another edition of The Morning Edge.

Have a great trading day

Will India once again turn to its diaspora for capital and will it work?

India may once again turn to the diaspora to defend the rupee as capital outflows intensify and conventional interventions lose effectiveness. Yet with global rates elevated, can costly NRI dollar mobilisation schemes still work as they did in the past? And can a temporary currency stabilisation reverse investor sentiment in a structurally different global market?

Abheek Barua writes, Can diaspora dollar schemes meaningfully stabilise the rupee this time? Are India’s forex reserves enough to manage sustained capital outflows? Has global capital permanently shifted away from growth stories towards innovation-led economies?

(*Compiled from various media sources)