Iran retaliation continues as Hormuz stays closed

Asia market update: Iran retaliation continues as Hormuz stays closed; Trump/Netanyahu promise 'quick end' to conflict; KR/JP equities suffer on oil import fears.

General trend and developments

- US session saw equities move higher to above Friday’s close, prior to the Iran conflict. However, Asia equities started lower and kept falling: Kospi underperformed Asia today, -5.6%, as it played catch-up to the weekend events following yesterday’s Korea holiday. Nikkei -2.6% on top of yesterday's -1.6%.

- US equity FUTs were also dragged down with Asia but fundamentally, as with the USD, the energy-independent US economy is well-positioned to cope with a Middle East conflict compared to the Energy import-hungry Asia nations. JPY has been notably deficient as a safe-haven currency during the current geopolitical turbulence.

- WTI crude ticked back up +2%, towards Monday highs, as China gas buyers confirmed that Beijing is pushing Iran to keep the Straight of Hormuz open.

- US press reported overnight that the US was preparing for a pick-up in attacks in Iran over the next 24 hours. Sure enough, explosions in Riyadh were later heard with the US Embassy in Riyadh hit by 2 drones ('limited' fire and minor material damage). US bases in Bahrain and Iraq also targeted with missiles. Pres Trump warned “You will find out what the US response will be'.

- Possible stimulus by nations that are oil importers in Asia (comments by Philippines Pres and Japan PM).

- During the session, reports that US Treas Sec Bessent & China's Vice Premier He Lifeng expected to convene in Paris at end of next week (ahead of Trump-Xi expected Summit at end-Mar).

- Better Japan Q4 CAPEX spending data adds upside risk to Q4 GDP [prelim figures were softer than expected].

- Chances of a BOJ hike (Mar 19th) amid the current geopolitical uncertainty fall further to just 4.5%. Reasonable demand coverage out of today’s JP 10-year bond auction (although with a slightly wider tail), above the 12-month btc average, even with a lower yield and particularly given PM Takaichi’s earlier comments implying that an oil price spike in Japan could make an extra budget more needed, and more expensive [if steepening continues]. Japanese yield curve headed up from the outset today, ticking even higher (10-years +5.6bps).

- Today’s PBOC Yuan stronger fix moved the offshore Yuan further back from its overnight lows (6.91), reaching 6.88.

- Australian dollar strengthened and the yield curve flattened with 3-year yields +15bps as Gov Bullock commented that the March RBA meeting is “live”. Demand at Australia’s 2047 Bond auction hit record high.

- Pres Trump to meet with US Treas Sec and Energy Sec at 2pm Tuesday [no reason disclosed yet] - financial press.

- US equity FUTs -0.7% to -0.9% during Asia trading.

Looking ahead (Asian-weighted focus, using Asian time zone)

- Tue Mar 3rd (Tue night EU Feb CPI, UK Spring Statement).

- Wed Mar 4th AU GDP, CN RatingDog / NBS Mfng PMIs.

- Thur Mar 5th AU Jan Trade Balance, (Thur night EU ECB Minutes, EU ECB Lagarde Speech).

- Fri Mar 6th EU GDP, (Fri Night US Jan Retail Sales, US Feb Nonfarm Payrolls).

Holidays in Asia this week

- Mon Mar 2nd South Korea.

- Tue Mar 3rd India, Thailand.

Headlines/economic data

Australia/New Zealand

- ASX 200 opens -0.4% at 9,172.

- Australia Q4 Current Account Balance (AUD): -21.1B v -18.3B prior.

- Australia Jan Building Approvals M/M: -7.2% v -14.9% prior.

- Australia ANZ Roy Morgan Weekly Consumer Confidence Index: 77.1 v 80.2 prior (update).

- Australia sells A$300M v A$300M indicated in Mar 2047 Bonds: Avg Yield: 5.1378% bid-to-cover: 4.7x.

- RBA Gov Bullock: Implications for Australia are mixed as we are a net energy exporter; A prolonged war in the middle east coupled with higher oil costs will harm Australia's economic activity, although the impact is not 100% clear.

- New Zealand Jan Building Permits M/M: +1.9% v -4.6% prior.

- New Zealand Fin Min Willis: Continues to monitor Iran events "closely" - financial press.

China/Hong Kong

- Hang Seng opens 0.5% at 26,190; Shanghai Composite opens +0.2% at 4,189.

- US Treas Sec Bessent & China's Vice Premier He Lifeng expected to convene in Paris at end of next week (ahead of Trump-Xi expected Summit at end-Mar) - US financial press.

- China gas buyers say that Beijing is pushing Iran to keep the Straight of Hormuz open - US financial press.

- China reportedly accelerates technology insurance development and plans to expand coverage - press.

- China Foreign Ministry: China and US are in communications about Trump-Xi exchanges; China was not informed in advance about US military operations.

- China Foreign Min Wang Yi: China has urged the US to cease military operations.

- US and China said to revise talks on reciprocal investment - financial press.

- China PBOC sets Yuan reference rate: 6.9088 v 6.9236 prior.

- China PBOC Open Market Operation (OMO): Injects CNY34B in 7-day Reverse Repos; Net Drains CNY492B v injects CNY19B prior.

Japan

- Nikkei 225 opens -0.6% at 57,730.

- Japan Q4 capital spending (CAPAX) Y/Y: 6.5% V 3.0%E.

- Japan Feb Monetary Base End of period ¥582.7T v ¥590.1T prior.

- Japan Jan Jobless Rate: 2.7% v 2.6% prior.

- Japan sells ¥2.6T VS. ¥2.6T indicated in 10-year JGB bonds; AVG yield: 2.129% V 2.2490% prior; bid-to-cover: 3.30X V 3.02X prior.

- Japan PM Takaichi: Chances of a supplementary budget 'are not zero' - financial press.

- BOJ Gov Ueda: BOJ is engaging in technical 5 experimentation on the CBDC system while managing the CBDC Forum - comments at "FIN/SUM 2026" fin tech event in Tokyo.

- Japan Chief Cabinet Sec Kihara: Called for safety in Hormuz Strait to Iran's ambassador.

- Govt to evacuate nationals in Iran as soon as today - financial press.

- Japan Trade Min Akazawa: Formed HQ on energy measures over situation in Iran.

- Japan Top FX Diplomat Mimura: My conversations with PM Takaichi suggest the political momentum to stick with manifesto of making food sales tax cut temporary is quite strong.

Korea

- Kospi reopens -1.3% at 6,165 (follows national holiday yesterday).

- South Korea PMI Manufacturing: 51.1 v 51.2 prior.

- South Korea sells 2-year Bonds: Avg Yield: 3.030%.

- Korean exchange activates sidecar on Kospi.

- Bank of Korea (BOK): To closely monitor FX and financial markets and respond if needed.

- South Korea reportedly has sufficient oil reserves even if situation prolongs - financial press.

- Approx 2.0K South Korea citizens said to be ‘stranded’ in Dubai; cites ruling party lawmaker.

Other Asia

- Thailand PM Anutin: Have oil reserves for 60 days; See some impact from Middle East conflict; Will mitigate impact.

- Singapore Feb Purchasing Managers Index: 50.6 v 50.5 prior-Indonesia govt may revise nickel quota later in 2026, by 25-30% - Indonesia nickel group.

- Taiwan sells NT$140B v NT$140B indicated in 12-month Certificates of Deposit (NCDs) Avg Yield: 1.261% v 1.210% prior, bid-to-cover 1.16x v 2.15x prior.

North America

- (IR) IRGC says targeted US base in Bahrain with missiles - financial press.

- (US) Pres Trump: You’ll find soon what US response will be for attack on US Embassy in Riyadh and for US service members killed - News Nation.

- Pres Trump to meet with US Treas Sec and Energy Sec at 2pm Tuesday [no reason disclosed yet] - financial press.

- (US) Vice President Vance: Trump wanted to make sure Iran never had nuclear weapons.

- (US) Feb Final S&P Manufacturing PMI: 51.6 v 51.4e (confirms 6th month of expansion).

- (US) Feb ISM Manufacturing: 52.4 V 48.3e; Prices Paid: 70.5 v 60.0e (highest since June 2022) driven by increases in steel and aluminum prices that impact the entire value chain.

- (US) JP Morgan CEO Dimon: Economy generally does not get driven by geopolitical conflict unless prolonged; Only expect minor inflationary hit from Iran conflict - CNBC.

- (US) Reportedly Democrats plan to respond to the Pentagon's AI fight - press.

- (US) US Treasury Sec Bessent: Treasury terminating all use of Anthropic products following US Pres Trump's direction (follows Dept of War announcement Friday) - X post, which also reposts Trump's order.

- (US) Reportedly Democrats plan to respond to the Pentagon's AI fight - press.

- (CA) Bank of Canada's Kozicki: Policy restraint needed if supply shock has big inflation effect.

- (CA) Canada Feb Manufacturing PMI: 51.0 v 50.4 prior (2nd month of expansion).

- (BR) Brazil Feb Brazil Manufacturing PMI: 47.3 v 47.0 prior (10th month of contraction).

Europe

- (IL) Hezbollah says it has launched drones at Northern Israel - financial press.

- Islamic resistance in Iraq says says has carried out drone swarm attack on hotel in Erbil, Iraq, housing US troops - financial press.

- (SA) US Embassy in Riyadh recommends American citizens in Saudi Arabia 'shelter in place immediately'; Saudi Defense Ministry says the US Embassy in Riyadh was hit by 2 drones, resulting in 'limited' fire and minor material damage - Press ** Update: Explosions said to be heard in Riyadh.

- (IL) Israel PM Netanyahu: Iran war is going to be quick and decisive action.

- (IR) US Pres Trump: A 'Big wave' has yet to come in Iran war - CNN citing phone interview with Trump.

- (QA) Qatar Energy to stop production of LNG and associated products due to military attacks (top-three LNG supplier to the EU, providing roughly 12%-14% of Europe’s total LNG imports as of late 2025).

-(IR) Iranian Revolutionary Guard Commander: Strait of Hormuz is closed and Iran will set ablaze any ship attempting to pass - Iranian State media.

- (IR) Iran Security Chief Larijani: Iran prepared itself for a long war [**Note: Ali Larijani seen as a key power broker and de factor Iran leader following the death of Iran Supreme Leader Khamenei].

- (IR) US Pres Trump: Us Pres Trump: Military continues large scale operations in Iran, eliminating grave threats from the Iranian regime; Will continue the mission to crush the threat Iran poses; We're ahead on our time projections (4-5 weeks), but can go longer, "we'll do whatever it takes".

- (IR) NATO Sec Gen Rutte: Absolutely no plans for NATO to get involved in the Iranian conflict; Doesn't believe the US has underestimated Iranian.

- (IR) PM Starmer: UK bases in Cyprus are not being used by US bombers; Iran put our armed forces at risk in Bahrain, Cyprus.

- (EU) EU Commission spokesperson: Reiterates stance of no immediate energy security of supply concerns; not taking emergency measures on gas storage.

- (EU) ECB Chief Lagarde: ECB carefully monitoring strange global situation.

- (EU) ECB’s Makhlouf (Ireland): Middle East situation creates uncertainty.

- (EU) ECB's Kocher (Austria): Too early to judge impact of Iran attacks on economy; should be prepared to move on rates quickly if risks materialize.

- (EU) ECB's Wunsch (Belgium): If higher oil prices last, ECB would have to assess; Won't be in a rush to react.

Levels as of 00:20 ET

Nikkei 225 -2.6%; ASX 200 -1.3%; Hang Seng -0.2%; Shanghai Composite -0.3%; Kospi -5.6%.

Equity S&P500 Futures -0.7%; Nasdaq100 -0.9%; DAX -1.0% FTSE100 -0.5%.

EUR 1.1676-1.1707; JPY 157.08-157.60; AUD 0.7078-0.7123; NZD 0.5934-0.5956.

Gold +0.7% at $5,357/oz; BTC +2.6% at $68,494, Crude Oil +2.0% at $72.66/bbl; Copper +0.4% at $5.9860/lb.