Asian financial markets responded to a series of significant geopolitical and economic developments at the start of the week. US President Donald Trump announced the suspension of planned military strikes against Iran, citing that Iran and other Middle Eastern countries requested time to finalize a deal, which would include the immediate and total reopening of the Strait of Hormuz and an end to Iran’s nuclear threat. Trump made this announcement on Truth Social, and further stated that US and Iran are set to resume negotiations Monday afternoon, fueling optimism for a diplomatic resolution to the five-month-old conflict in the region [1][2][3].
This easing of Middle East tensions, combined with OPEC+'s decision to increase oil production in September, triggered a sharp decline in crude oil prices. The MCX Crude Oil contract expiring August 19 traded over 6% lower to near Rs. 7,600 in opening trade [2][3]. Lower oil prices provided a boost to currencies of major oil-importing economies. The Indian Rupee (INR) strengthened, with USD/INR down 0.25% to near 95.15, its lowest in over three weeks, and the Indonesian Rupiah (IDR) held gains, with USD/IDR subdued around 18,040 for a fourth consecutive day [1][2].
Stock markets reflected these developments. India's Nifty50 index rose 0.7% to around 24,555 according to [2], and 0.80% according to [3], as investors anticipated the Reserve Bank of India's (RBI) upcoming policy decision. Economists at ING expect the RBI to keep the repo rate unchanged at 5.25%, citing that while headline inflation surprised to the upside in June due to higher fuel prices, core inflation remains below target, giving policymakers room to maintain current rates [2]. Meanwhile, South Korea’s KOSPI slumped nearly 5%, reversing part of Friday's record 18% surge, due to a selloff in AI-linked technology shares, and Japan's Nikkei 225 traded lower, impacted by a sharp rally in the Japanese Yen following confirmed joint currency intervention by Japan and the US [3].
The US Dollar Index (DXY) continued to face pressure, trading 0.1% lower at around 99.70, despite market expectations for a Federal Reserve rate hike in September, with CME FedWatch tool showing a 67.7% probability [2]. The Greenback's weakness was compounded by official foreign exchange operations and improved global risk sentiment on the back of the US-Iran ceasefire and OPEC+ news [1][2][3].
Looking ahead, investors are focused on the US Nonfarm Payrolls (NFP) data for July and the ISM Manufacturing PMI, both due later in the week, as well as the RBI policy decision, all of which are expected to drive further market direction and volatility [2][3].
CONCLUSION
The announcement of a US-Iran ceasefire and OPEC+'s decision to boost oil output have eased geopolitical tensions and lowered oil prices, strengthening Asian oil-importer currencies and supporting equities like India's Nifty50. However, volatility persists in regional markets, with South Korea's KOSPI and Japan's Nikkei 225 under pressure from sector-specific and currency moves. Market attention now turns to upcoming central bank decisions and US economic data for further direction.