In brief:
- Oil rebounds after sharp drop despite conflicting US–Iran signals
- Reports of strikes on Iranian gas infrastructure add to energy risk premium
- Gulf states edging closer to conflict, raising escalation risks
- Japan CPI soft headline but firm underlying inflation
- Fed’s Daly and RBNZ’s Breman stress conditional policy amid energy shock
- Apollo caps redemptions, highlighting private credit stress
- Australian consumer confidence plunges, inflation expectations surge
- USD firms broadly; FX ranges modest, equities track Wall Street rebound
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Oil prices clawed back part of the prior session’s sharp losses, which had followed US President Donald Trump’s decision to delay planned strikes on Iranian energy infrastructure after describing talks with Tehran as “productive.” However, Iran denied any negotiations had taken place, calling the reports false, while the rebound in crude was also supported by fresh headlines of strikes on gas-related facilities in Isfahan.
Geopolitical tensions remained elevated throughout the session. Reports ICBS) highlighted the presence of Iranian naval mines in the Strait of Hormuz, while Iran was said to have launched missiles toward Kuwait and Israel. In the US, an explosion and large fire at the Valero refinery in Port Arthur, Texas, one of the country’s largest at around 435k bpd, added to energy market sensitivity.
Meanwhile, the broader regional picture continues to deteriorate. Wall Street Journal reporting suggested Gulf states are moving closer to direct involvement in the conflict, with Saudi Arabia signalling a potential shift toward participation and the UAE targeting Iranian-linked financial networks. The developments point to rising risks of a wider conflict and potential disruption to global energy flows.
In Japan, February CPI data showed a cooling in headline inflation but resilience in underlying pressures. Core CPI slowed to 1.6% y/y from 2.0%, dipping below the Bank of Japan’s target, while core-core inflation held firm at 2.5%. The data reinforces expectations that policy normalisation remains on track despite near-term softness. USD/JPY edged higher on the session.
Central bank commentary from both the Federal Reserve and the Reserve Bank of New Zealand struck a similar tone. Policymakers indicated they would likely look through a temporary energy-driven inflation spike, but warned that a prolonged conflict could result in higher inflation, weaker growth and a softer labour market, complicating the policy outlook.
In credit markets, Apollo Global Management capped redemptions in its Apollo Debt Solutions fund after withdrawal requests exceeded limits, highlighting ongoing stress in private credit and liquidity-sensitive vehicles.
In Australia, consumer sentiment deteriorated sharply, with confidence falling to a record low amid rising petrol prices, the ongoing conflict and recent RBA tightening. Inflation expectations also surged, with markets now turning to the February CPI release due next.
In FX, the US dollar firmed modestly, with EUR, GBP, AUD, NZD and CAD all easing against the greenback in relatively contained ranges. Asia-Pacific equities took their lead from the prior Wall Street rebound, trading with a firmer tone.
