investingLive Asia-Pacific FX information wrap: UAE pushes to power the reopen of Hormuz

In brief:

• Oil edges higher amid ongoing Middle East tensions and mixed signals
• Trump signals imminent U.S. withdrawal (2–3 weeks), no deal required
• UAE moves closer to direct military involvement in Hormuz
• Fresh attacks highlight ongoing escalation risks across Gulf infrastructure
• Japan Tankan solid but cautious; China PMI expansion slows with rising cost pressures
• FX rangebound, gold steady after prior rally
• Focus shifts to Fed speakers and Trump’s prime-time address

Oil prices ticked modestly higher, navigating a complex mix of geopolitical escalation and conflicting signals around the trajectory of the Iran conflict.

On the policy front, U.S. President Donald Trump struck a notably dovish tone on the duration of the war, stating the United States could withdraw “within two to three weeks” and emphasising that a deal with Iran is not required to end military operations. The comments reinforce a growing “mission completion” narrative from Washington, suggesting the administration may be preparing for a near-term exit despite the absence of a formal agreement.

However, developments on the ground continue to point to sustained tension. The United Arab Emirates is reportedly preparing to support efforts to reopen the Strait of Hormuz by force, a significant shift that would mark the first direct combat role by a Gulf state in the conflict. This underscores a hardening regional stance and raises the risk of broader escalation.

At the same time, hostilities remain active. Reports of strikes continue to filter through, including an attack on an oil tanker near Doha and a drone strike targeting fuel infrastructure at Kuwait International Airport, reinforcing the fragility of energy supply routes and the persistent risk premium embedded in crude markets.

On the data front, Japan’s Tankan survey showed improving business sentiment, with large manufacturers at their strongest levels since 2021, though forward-looking indicators softened and profit expectations declined. In China, manufacturing PMI eased to 50.8 from 52.1, marking a fourth consecutive month of expansion but with slowing momentum and a sharp rise in input cost pressures.

Across markets, major FX pairs traded in relatively tight ranges, while gold consolidated after its recent gains, reflecting a pause in safe-haven momentum.

Looking ahead, attention turns to upcoming Fed commentary, with St. Louis Fed President Musalem (on the economy at 9.05 am US Eastern time) and Governor Barr (on other matters at 9.10am) both scheduled to speak, alongside a highly anticipated prime-time address (9pm US Eastern time) from President Trump on the Iran conflict, which could provide further clarity on the U.S. strategy and timeline.