Asia open: A high-stakes poker game begins

The U.S. dollar strutted its stuff in Thursday's session, rising 0.3% to punch through the 102.00 mark. Escalating Middle East tensions and G10 currency weakness paved the way for the greenback's dominance. The British pound led the pack of losers after Bank of England Governor Andrew Bailey dropped hints of accelerated rate cuts if inflation behaves. Meanwhile, USD/JPY kept climbing, with traders dumping any hopes of a third Bank of Japan rate hike this year.

Also helping the dollar, the U.S. macro data did its best to keep the "resilient economy" narrative alive. Jobless claims stayed firm at 225k, just a touch above the previous week’s figures and expectations, while the ISM services index blew the roof off, soaring to 54.9 from 51.5 in August—leaving market doves shaking their heads. New orders surged to 59.4, but there was a small hiccup with services employment dipping into contraction territory at 48.1. Despite that blip, the services sector continues to carry the torch, smoothing out the manufacturing rough patches and keeping the U.S. economy chugging along.

Now, all eyes are on today’s nonfarm payrolls and unemployment data. Markets are on edge, waiting to see if this key report will play ball with the Fed’s less dovish narrative. With strong JOLTS job openings and ADP employment numbers earlier in the week, downside risks have eased, but a surprise in the payroll numbers could quickly change the script.

In Asia, the scene was more dramatic as regional currencies sank deeper against the greenback. The Middle East’s geopolitical turmoil is causing all sorts of anxiety, with traders fearing a major Israeli strike on Iran’s oil facilities could send oil prices through the roof. If Kharg Island—where 90% of Iran’s oil exports flow—gets hit, it would rock the energy markets, delivering a gut punch to Asian economies that rely heavily on oil imports.

What's worse, rising oil prices could force the Fed to rethink its rate-cutting strategy, keeping the dollar in the driver’s seat and piling more pressure on already-struggling Asian currencies. Despite being linked to an oil-exporting country, even Malaysia's ringgit isn’t immune. The usual risk-averse herd mentality is at play here as capital flees Asian assets, leaving the ringgit flailing without much speculative safety net support in global markets due to its status as a non-tradable currency.

Over in the oil pits, crude prices popped over 5% as fears of Middle East supply chaos took hold. Investors are bracing for what could be Israel’s strike on Iran’s critical oil infrastructure—Kharg Island being the golden target. A whopping 90% of Iran’s oil exports pass through there, and traders know it. With short positions frantically unwinding, the oil market has gotten an adrenaline shot. Should the bulls jump in, this rally could push oil even higher.

But don’t let the fireworks fool you—there’s still plenty of oil sloshing around. If Israel’s threat fizzles out, we could see prices crash back down to earth. Still, seasoned oil traders aren’t about to ditch their "Middle East tinderbox" hedges just yet, especially with weekend risk hanging over the market like a dark cloud. The stakes are high, and nobody’s willing to blink first.