Risk-off continues over Iran conflict

Asia market update: Risk-off continues over Iran conflict; Asia equities, currencies, energy, shipping hit hard.

General trend and developments

- Further selling of risk assets continued amid the backdrop of the Iran conflict with silver, Asian equities and tech stocks all down. However, some of these moves are perhaps partly for selling of profits to cover other losses in portfolios due to Middle East conflict.

- Kospi crushed again, -13.0% in sharpest fall since the Aug 5th, 2024 global equities collapse. Later pared losses to -10%.

-Thailand Stock Index down >7%; the index later dropped by >7% IDX -7%, Nikkei -4% with the banking Topix -4%.

- Shipping and energy companies in Asia hard hit: Mitsui & Co. Falls Most in 11 Months Outpacing Losses in Topix —Tokyo Gas Shares Fall Outpacing Losses in Topix —*Pan Ocean Shares Fall 15% to KRW5,240—CN defense —China Oilfield Class H Falls 7.7%; Trading Volume Quadruples —Cosco Shipping Dev. Class H Falls 14%; Trading Volume Surges.

- Japanese oil/gas refiner Impex canceled its Yen-denominated bond sales, citing current market environment.

- Reportedly some Asian oil refiners said to mull run cuts of 20-30% amid widening Middle East war and difficulties shipping through the Strait of Hormuz.

- US session saw some assistance from Pres Trump announcement that the US government would backstop insurance and perhaps provide military escorts to ships through the Hormuz clearly provided a positive jolt to sentiment.

- Prices got worse after US State Department authorized non-emergency US govt employees and family to leave Saudi Arabia due to safety risks. Later a further State Dept warning for Cyprus.

- AU 3-year yields were early up another 2bps to hit highest in three years, but then fell 4bps during the session.

- Major Japanese oil and gas refiner Inpex canceled debt sales in related to Yen-denominated bonds.

- Oil-hungry Asia currencies suffering in Mid East conflict; Thai baht weakens to 31.8, lowest since february 6 , INR to over 92, KRW back down to 1,480.

- Chances of BOJ hikes rose overnight via OIS probabilities: March back up to 8%, April to 67.5%, and June up to 91.5%. Followed yesterday’s 5-8bps rises across the yield curve on Mid-East conflict and PM Takaichi’s comment that a supplementary budget may in fact be necessary. Today, however, front-end down 4bps as long-end ticked up only slightly.

- Meanwhile in Australia, yesterday saw market probs of an RBA rate hike on Mar 17th jump up to 27% from 0% day before. [Fast rising yields, Geopolitical tensions with fears of oil prices spikes and Gov Bullock calling the meeting “live” all contributing to the jump].

- Export-reliant New Zealand saw better data again.

- Japan Feb Consumer Confidence Index: rose to a multi-year high of 40.0.

- Advance comments out of the 2026 China NPC Spokeperson ahead of the main event tomorrow (GDP and CPI targets for 2026 expected), including conciliatory comments to the US, despite US actions in Iran and Venezuela, Chinese allies.

- US equity FUTs -0.5% to -0.7% during Asia trading.

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

-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

- (AU) ASX 200 opens -1.6% at 8,935.

- (AU) Australia Q4 GDP Q/Q: 0.8% v 0.8%e; Y/Y: 2.6% v 2.3%e.

- (AU) Australia Feb Final PMI Services: 52.8 v 52.2 prelim (confirms 25th month of expansion).

- (AU) Australia Treasurer Chalmers: Real prospect Middle East conflict will put upward pressure on prices, could weigh on global growth - press.

- (AU) Australia PM Albanese: No justification for Iran's attacks on civilian areas in Abu Dhabi, Dubai, and other areas of UAE and Gulf States.

- (NZ) New Zealand Q4 Terms of Trade Index Q/Q: +3.7% v -0.3%e.

- (NZ) New Zealand Feb ANZ Commodity Price M/M: 4.2% v 2.0% prior.

China/Hong Kong

- (CN) Shanghai Composite opens -0.9% at 4,088; (HK) Hang Seng opens -1.2% at 25,469.

- (CN) China Feb Manufacturing PMI (govt official): 49.0 v 49.2e (2nd month of contraction).

- (CN) China Feb RatingDog Manufacturing PMI: 52.1 v 50.1e (4th month of expansion), strongest improvement in >5 years.

- (CN) CAICT: Shipments of phones within China for Jan: 22.9M units, -16.1% y/y.

- (CN) China banks said tighten gold trade rules as volatility rises - China press.

- (HK) Hong Kong Feb PMI (whole economy): 53.3 v 52.3 prior.

- (CN) China PBOC sets Yuan reference rate: 6.9124 v 6.9088 prior.

- (CN) China PBOC Open Market Operation (OMO): Injects CNY41B in 7-day Reverse Repos; Net drains CNY369B v drains CNY492B prior.

Japan

- (JP) Nikkei 225 opens -1.5% at 55,463.

- (JP) Japan Feb Consumer Confidence Index: 40.0 v 38.2e.

- (JP) Reportedly Japan considers Iwo Jima defense functions - press.

- (JP) Japan Feb Final PMI Services: 53.8 v 53.8 prelim (confirms 16th month of expansion).

- (JP) Japan Trade Min Akazawa to travel to US on Thursday to discuss Japan-US investment - Kyodo.

- (JP) Japan Chief Cabinet Sec Kihara: Two Japanese nationals have been evacuated from Ira hn to Azerbaijan.

- (JP) BOJ Gov Ueda: BOJ communicates closely with government - parliamentary testimony.

- (JP) Japan Shipowners' Association: 44 member ships stuck in Persian Gulf.

Korea

- (KR) Kospi opens -3.4% at 5,593.

- (KR) South Korea Jan Industrial Production M/M: -1.9% v 0.5%e; Y/Y: 7.1% v 3.2%e.

- (KR) South Korea: Briefly halts program trading in Kospi market.

- (KR) BOK Gov Rhee to hold meeting to review markets.

- (KR) South Korea President Lee to hold cabinet meeting on Thursday- (KR) South Korea Ruling Party Floor Leader: To pass bill on US investment on March 12th.

Other Asia

- (SG) Singapore Feb PMI (whole economy): 59.2 v 56.8 prior.

- (ID) Indonesia to keep budget gap at <3% amid Middle East situation – financial press.

- (ID) Indonesia Central Bank (BI): Intervening in offshore and onshore FX markets to protect Rupiah amid Middle East tensions - statement.

- (VN) Vietnam Jan-Feb CPI Y/Y: 3.0%.

- (VN) Vietnam Jan-Feb Industrial Production Y/Y: 10.0%.

- (VN) Vietnam Jan-Feb Foreign Investment Pledges Y/Y: 61.5%.

- (VN) Vietnam Jan-Feb Foreign Investment Inflows Y/Y: 8.8%.

- (TW) Taiwan Stabilization Fund may convene meeting on markets - Taiwan press.

- (IN) India Feb Feb Final PMI Services: 58.1 v 58.4 prelim (confirms 55th month of expansion).

North America

- (US) Weekly API Crude Oil Inventories: +5.6M v +11.4M prior.

- (US) Pres. Trump: Effective IMMEDIATELY, I have ordered the United States Development Finance Corporation (DFC) to provide, at a very reasonable price, political risk insurance and guarantees for the Financial Security of ALL Maritime Trade, especially Energy, traveling through the Gulf; If necessary, the United States Navy will begin escorting tankers through the Strait of Hormuz.

- (US) Pres Trump reportedly open to backing armed groups in Iran to dislodge regime - WSJ.

- (US) President Trump: US needs to get crypto market structure bill done; Crypto industry close to becoming truly successful.

- (US) Reportedly OpenAI and US Pentagon strengthen recently signed contract to include protections and bans against domestic surveillance - Axios.

- (US) US Embassy in Saudi Arabia's Riyadh: Imminent missile threat over Dhahran.

- (US) Fed's Kashkari (voter): It's too soon to know how the Iran war will impact inflation; Had expected one rate cut this year, but now unsure.

- (US) Military Central Command: US has struck nearly 2,000 targets in Iran - financial press.

- (US) WSJ Timiraos: Powell won, but the Fed might still lose.

- (US) State Department: Updated travel advisory for Cyprus to reflect authorized departure of non-emergency US government personnel.

- (BR) Brazil Q4 GDP Q/Q: 0.1% v 0.2%e; Y/Y: 1.8% v 1.8%e.

- (BR) Brazil Jan Total Formal Job Creation: +112.3K v +95.0Ke.

- (PE) Can't guarantee natural gas will return in 14 days - local press.

Europe

- (UK) Chancellor Reeves Spring Statement: Inflation and borrowing are down; New OBR forecasts show economic plan is right; Reaffirms one single fiscal event every year.

- (UK) UK Home Office: 'Emergency brake' on visas has been imposed for first time on nationals from 4 countries after surge in asylum claims.

- (UK) UKMTO: Received a report of an incident 137NM East of Muscat (Oman).

- (UK) UKMTO says it has received a report of an incident 7NM East of UAE's Fujairah - financial press.

- (UK) Bank regulator axes union contract under Trump order - financial press.

- (UK) UK government: To continue to work with airlines to find additional routes.

- (ES) US Pres Trump: Will be cutting off all trade with Spain; Notes additional unhappiness with the UK; We must charge tariffs to nations who 'Play with their money'; We’ve instituted a 15% tariff on everybody.

- (IE) Ireland Feb PMI Services: 51.8 v 54.5 prior (59th month of expansion).

- (DK) Denmark Feb Foreign Reserves: 687.3B v 673.9B prior.

Middle East

- (IQ) Iraq reportedly decreased oil production from Rumaila oil field by 700K bpd; Shut down 450K bpd production from West Qurna 2; Could be forced to cut production by >3M bpd in a few days - officials.

- (SA) US State Department: Authorizes non-emergency US govt employees and family to leave Saudi Arabia due to safety risks.

- (IR) Iran guards (IRGC) say they have ‘complete control’ of Hormuz Strait - AFP.

- (IR) US reportedly considers military protection in the Strait of Hormuz for Middle Eastern oil and gas tankers in an effort to ease rising energy prices - Politico.

- (IR) NY Fed President Williams: Iran conflict is the type of development that could hit both sides of the mandate, but the key is how much it influences each; The impact of the Iran conflict right now would be through oil prices, financial market conditions and asset prices, but it's too soon to gauge its impact; Has been 'Reasonably muted' so far.

- (IR) ECB's Kazaks (Latvia): ECB should sit tight on rate decisions amid uncertain consequences in the Iranian conflict; There are opposing forces arising out of the Iranian shock and it really depends on which one is stronger.

- (IR) Iran ambassador to UN: Not time for negotiation with US.

- (IR) Reportedly the US CIA is working to arm Kurdish forces to foment an Iran uprising - CNN.

- (IR) Israel Military: Began a broad wave of strikes in Iran.

- (IR) Nvidia, Amazon temporarily close offices in Dubai - CNBC.

- (IR) Kuwaiti F-18 fighter jet caused accidental shootdown of three US F-15s on Sunday - WSJ.

- (IR) ‘Several’ explosions heard west of Tehran [Iran] – US financial press.

- (SA) Reportedly Aramco explores plan to export oil via Red Sea to avoid Strait of Hormuz - press.

- (SA) Saudi Arabia: Will take all necessary measures to defend its security; cites cabinet statement.

- (SA) CIA station in Saudi Arabia hit in Iranian drone strike - WSJ.

- (SA) Saudi Arabia Defense Ministry: Intercepted 2 cruise missiles in Al-Kharj.

- (SA) Saudi Arabia Defense Ministry: intercepts drone in Eastern Province.

- (SA) Gulf Navigation says Fujairah opes continue at full capacity.

- (QA) Qatar Gulf International Services: Notes stoppage of certain operations and services related to energy sector activities.

- (IL) IDF: Identified missiles launched from Iran toward Israel - Telegram.

Levels as of 00:20 ET

Nikkei 225 -3.7%; ASX 200 -1.9%; Hang Seng -3.0%; Shanghai Composite -1.1%; Kospi -9.8%.

Equity S&P500 Futures -0.5%; Nasdaq100 -0.7%; DAX -3.4% FTSE100 -2.8%.

EUR 1.1621-1.1574; JPY 157.86-157.18; AUD 0.7046-0.6985; NZD 0.5906-0.5861.

Gold +1.4% at $5,159/oz; BTC -0.1% at $67,906, Crude Oil +1.3% at $72.50/bbl; Copper +1.3% at $5.9070/lb.