Oil Surge, War Threats Keep Markets on Edge in Risk-off Mood

GLOBAL MOOD: Risk-Off
Drivers: Trump's Tuesday power plant ultimatum, US aircraft downed in Iran

Asian markets reflected a cautious risk-off bias despite selective gains, as geopolitical tensions kept investors on edge. Oil prices remained elevated, with Brent Crude and WTI Crude holding above $110 per barrel after Donald Trump issued an ultimatum to Iran to reopen the Strait of Hormuz or face attacks.

While the Nikkei 225 and Kospi edged higher, broader sentiment remained fragile amid fears of supply disruption and escalating military conflict. The Strait, a critical oil chokepoint handling about a fifth of global supply, remains central to market risk. Conflicting signals on diplomacy versus escalation have created a binary outlook, with investors bracing for either a ceasefire breakthrough or intensified hostilities in the coming days.

TODAY’S WATCHLIST
 - RBI MPC 3-day Policy Meeting Begins
 - India March S&P Global Services PMI
 - US March ISM Non-Manufacturing PMI

THE BIG STORY
President Trump issued his most explosive ultimatum yet on Easter Sunday, threatening to target Iran's power plants and bridges on Tuesday if the Strait of Hormuz is not reopened, posting an expletive-laden Truth Social message demanding Tehran "Open the Strait or you'll be living in Hell." The post, which ended with "Praise be to Allah," sent shockwaves through markets opening after the long holiday weekend. Trump simultaneously told Fox News that a deal with Iran was possible by Monday and that Tehran was actively negotiating the latest in a series of contradictory signals that have whipsawed markets throughout the five-week conflict. A Monday Oval Office news conference was also announced, adding another high-stakes communication event to an already volatile week.

The diplomatic drama unfolded against a backdrop of direct military confrontation inside Iranian territory. US special forces rescued two downed F-15 pilots in a complex operation in the mountainous Isfahan province which Trump described as "one of the most daring Search and Rescue Operations in US History." Iran's military said the rescue operation resulted in the destruction of two US C-130 transport planes and two Black Hawk helicopters, while an Israeli Hermes-900 drone and a US MQ-9 drone were also downed in Isfahan province. The simultaneous loss of multiple US military aircraft inside Iran represents the most significant direct military setback of the conflict, raising the human and material cost of the campaign dramatically even as Trump signals a possible deal by Monday. Markets face a binary risk event at Tuesday's open either a ceasefire announcement or the most intense escalation of the five-week war.

Data Spotlight 
The US economy added 178,000 jobs in March, the most since December 2024 and nearly three times the 60,000 forecasts as healthcare workers returned from strike action, adding 76,000 positions, while construction gained 26,000 and transportation and warehousing added 21,000. Federal government employment continued its decline at -18,000 and financial activities shed 15,000. The unemployment rate fell to 4.3% from 4.4%, though the decline partly reflected a 396,000 drop in labour force participation rather than pure job creation. February's payroll decline was revised deeper to -133,000, with the two-month net revision 7,000 lower than previously reported.

The services sector told a starkly different story with the S&P Global Services PMI contracted for the first time in over three years at 49.8, with firms citing reduced client confidence, softer demand, rising energy costs, and geopolitical uncertainty. US Composite PMI was revised sharply lower to 50.3, its weakest since September 2023, as services contraction nearly offset manufacturing's gains.

Takeaway
March's payroll rebound mainly reversed February’s strike-related drop, not a sign of stronger job growth. Falling participation rates and shrinking services PMI indicate caution beneath the headline jobs number, as West Asia’s energy shock dampens consumer confidence and spending before affecting layoffs. The Fed will likely pause, noting resilience but recognising rising stagflation risks.

WHAT HAPPENED OVERNIGHT

• US stocks steady after volatile session as Iran-Oman tanker toll reports ease energy fears
  • The S&P 500 and Nasdaq 100 each inched up 0.3% while the Dow closed flat after paring deeper intraday losses.
  • Dated Brent hit its highest since 2008 after Trump delivered formal warnings of escalated Iran attacks, before markets reversed on diplomacy signals.
  • Reports that Iran and Oman are coordinating a toll system for tankers leaving the Gulf provided the key relief catalyst, suggesting a partial Hormuz workaround is being explored.
  • Nvidia gained 3%, Microsoft and AMD rose around 1% as tech steadied alongside retreating Treasury yields.
  • Tesla sank 5.4% after posting one of its worst sales quarters in recent years, a company-specific blow on top of the macro headwinds.
  • Blue Owl fell 1.6% after facing redemption requests of 41% in its private credit funds, forcing liquidation caps the latest and most severe private credit stress signal of the conflict period.

• US Treasury yield rises to 4.35% as blowout jobs report cements Fed on hold 
  • The 10-year yield rose to 4.35% in a shortened session, pulling further away from the two-week lows touched earlier last week.
  • The US economy added 178,000 jobs in March nearly three times the 60,000 forecasts in a stunning labour market rebound from February's 92,000 job loss.
  • The unemployment rate edged down to 4.3% while wage growth slowed, a near-ideal combination that signals labour market resilience without adding to inflation pressure.
  • The blowout payrolls print reinforced expectations that the Fed will keep rates unchanged throughout 2026, pushing yields higher on a stronger-for-longer growth read.
  • Trump intensified rhetoric against Iran, threatening to target bridges, power plants, and infrastructure, keeping the geopolitical risk premium firmly embedded in yields.

• US Dollar reclaims 100 as Trump's escalation speech kills ceasefire optimism overnight
  • The US dollar index climbed 0.46% to 100.02, reclaiming the psychologically significant 100 level after two straight sessions of losses.
  • Trump's televised address vowing more aggressive Iran strikes over the next two to three weeks directly reversed the ceasefire narrative markets had been pricing.
  • The dollar rose even against fellow safe-haven currencies, the Swiss franc and Japanese yen both weakened, signalling a broad and forceful flight to the greenback.
  • Trump offered no concrete timeline for opening the Strait of Hormuz or ending the conflict, leaving markets with no anchor for pricing a resolution.
• WTI surges 11% in biggest absolute price rise since 2020 as Trump vows continued Iran strikes
  • Brent crude jumped $7.87 or 7.78% to $109.03/barrel as Trump's confirmation of continued Iran attacks shattered the ceasefire optimism built over the prior three sessions.
  • WTI surged $11.42 or 11.41% to $111.54/barrel, the largest absolute single-session price rise since 2020.
  • Trump's formal warning of escalated attacks in the weeks ahead directly reversed Tuesday and Wednesday's de-escalation rally in a single session.
  • Brent briefly hit its highest since 2008 during intraday trading before settling slightly lower.
  • The Iran-Oman tanker toll reports provided only partial relief, markets ultimately concluded that a toll system is a workaround rather than a resolution of the underlying supply shock.

 

Day’s Ledger*

Economic Data 

• India March S&P Global Services PMI
• US March ISM Non-Manufacturing PMI

Corporate Actions

• Aurobindo Pharma to consider share buyback
• AVG Logistics to consider fund raising

 Policy

• RBI MPC 3-day Policy Meeting Begins
  

Tickers to Watch

• ADANI POWER secured an LoA from MSEDCL to supply 2,500 MW round-the-clock renewable energy power for 25 years.
• AXIS BANK advances increased 18.4% YoY to ₹12.44 trillion as on Mar 31 from ₹10.51 trillion.
• BAJAJ FINANCE new loans booked grew 20.5% YoY to 12.89 million in Jan-Mar from 10.70 million.
• GODAWARI POWER & ISPAT received consent to operate a 6.91 MW waste heat recovery-based power plant from the Chhattisgarh Environment Conservation Board.
• GR INFRAPROJECTS executed an EPC agreement worth ₹18.98 billion with West Central Railway.
• HDFC BANK gross advances rose 12% YoY to ₹29.60 trillion as on Mar 31 from ₹26.43 trillion.
• INDUSIND BANK net advances declined 8.7% YoY to ₹3.15 trillion as on Mar 31 from ₹3.45 trillion.
• KOTAK MAHINDRA BANK net advances rose 16.2% YoY to ₹4.95 trillion as on Mar 31 from ₹4.26 trillion.
• PRESTIGE ESTATES PROJECTS launched a 5,120-unit township project in Hyderabad with a gross development value of ₹95 billion.
• TATA STEEL received a demand notice of ₹17.55 billion from Jharkhand authorities over alleged excess coal extraction at West Bokaro Colliery.
• YES BANK loans and advances grew 10.7% YoY to ₹2.72 trillion as on Mar 31 from ₹2.46 trillion.

Must Read

• OPEC+ hikes oil production quotas by 206,000 barrels per day
• How a perilous US rescue mission in Iran nearly went off course
• Chinese Bonds Near Inflection Point as Inflation Path Shifts
• Is Trump the President Who Lost Asia to China?
• US Inflation Seen Spiking in First Snapshot Since Iran War
• Private Credit Turmoil Has Retail Investors Eyeing the Exits

(*Compiled from various media sources)