Oil and Bond Yields Rise as US-Iran Truce Lapses, Weighing on Asian Stocks

Asian markets opened with modest gains on Tuesday, but the positive momentum was quickly blunted by rising oil prices and bond yields following the expiration of the US-Iran ceasefire. Tehran's announcement of a shift to a "fully offensive" military posture has reintroduced geopolitical risk into the global financial landscape.

MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.8%, driven largely by a strong rebound in South Korea's KOSPI, which climbed over 3% as the Seoul market reopened after a holiday. In contrast, Japan's Nikkei 225 slipped 0.3%, and US futures pointed to a flat open on Wall Street.

The bond market reflected the renewed uncertainty, with the yield on the US 10-year Treasury rising to 4.728%. The 30-year yield also climbed to 5.3146%, marking its highest level in over two decades. Analysts noted that previous moves above 4.65% on the 10-year have typically prompted soothing comments from the Trump administration regarding the Iran conflict, but this time no such assurances have been forthcoming.

The selloff in bonds extended to Japan, where the 10-year government bond yield hit a three-decade high of 2.945%. This comes after a weak session on Wall Street, where soft US economic data, including an unexpected drop in retail sales, led investors to scale back expectations for an imminent Federal Reserve rate cut.

Oil prices, which had already surged by more than $2 on Monday, continued their upward trajectory. Brent crude futures edged up 0.2% to $91.06 a barrel as trading resumed in Asia, with traders refocusing on global supply worries amid the Middle East stalemate.

The US dollar index hovered near a two-month low of 99.527. Meanwhile, gold extended its gains for a third consecutive day, rising 0.1% to $4,420.07. In the cryptocurrency space, bitcoin was up 0.1% at $64,398.48, while ether gained 0.3% to $1,911.40.