Asia FX Wrap: Middle East Escalation Roils Markets July 13
US strikes on Iran, Hormuz fears, and profit-taking in tech hammered Asia-Pacific equities and FX to open the week.
The week kicked off with a gut punch. US forces launched fresh waves of strikes on Iranian targets, Iran retaliated by targeting Jordan with ballistic missiles, and — the headline that moved everything — Iran closed the Strait of Hormuz. That one move lit oil on fire, sending crude futures up more than 4% right as Globex opened Sunday night. If you trade energy or anything correlated to it, you were either positioned or you got wrecked.
Equities had nowhere to hide. South Korean shares cratered more than 5%, dragged down by heavy profit-taking in SK Hynix after a monster run. The Nikkei fell in sympathy. US, European, and Asian equity futures all moved lower in lockstep as the Middle East escalation dominated the tape. Risk-off was the only trade in the room.
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Gold, typically your go-to in a geopolitical panic, actually slid more than 1%. Why? The Fed's inflation warning hit at the same time — traders are pricing the possibility that an oil shock reignites price pressures and keeps the Fed on hold longer. That's a toxic combo for gold bulls expecting rate cuts to carry the metal higher. Oil at 4% up, gold down — the market is telling you this is an inflation scare, not a pure flight-to-safety.
On the macro side, Goldman Sachs expects US core CPI to ease to 2.8% year-on-year for June, but that call looks more complicated now with an oil spike baked in. The PBOC set its USD/CNY reference rate at 6.7972, slightly weaker than the 6.7850 estimate — a subtle but worth-watching signal on yuan management. Meanwhile, Angola added the yuan to its official bank reserve currency options alongside the dollar and euro, another small brick in China's de-dollarization wall. New Zealand's services PMI climbed back above 50 to 50.6 in June, a rare bright spot in an otherwise ugly session.
Bottom line: Hormuz risk is back on the table and it changes the calculus on everything from energy stocks to EM currencies. Watch the strait headlines minute by minute this week. Continue reading at Forexlive.
