Asian Markets Steady as Oil Rises Amid Israel-Iran Tensions and Fed Watch

Asian markets held firm on Monday despite rising geopolitical risks from the Israel-Iran conflict, which pushed oil prices higher and added uncertainty ahead of several key central bank meetings. Brent crude rose $1.11 to $75.34 a barrel, while U.S. crude added $1.05 to reach $74.03, extending last week’s 13% surge. The ongoing conflict raises fears of supply disruptions through the Strait of Hormuz, a crucial global oil chokepoint.

While global tensions mounted, investors remained composed. MSCI’s Asia-Pacific index excluding Japan edged up 0.1%, with Japan’s Nikkei climbing 0.8% and South Korea gaining 0.5%. U.S. futures showed modest gains, with S&P 500 and Nasdaq futures up 0.1% and 0.2%, respectively.

Focus now turns to the Federal Reserve’s meeting this week. With oil-driven inflation risks rising, markets expect no change to the current 4.25%-4.5% rate band. Analysts, including JPMorgan’s Michael Feroli, anticipate the Fed’s updated "dot plot" will reflect only one rate cut in 2025, down from the previously forecasted two. Still, traders are betting on rate cuts starting in September, with two expected by year-end.

U.S. economic data, including retail sales on Tuesday and weekly jobless claims on Wednesday, will also influence sentiment. Meanwhile, European markets were slightly pressured due to energy import reliance, with EUROSTOXX 50 and DAX futures dipping.

The dollar gained 0.3% against the yen, while the euro slipped 0.1%. Oil-exporting currencies like the Norwegian crown hit multi-year highs. Gold rose 0.5% to $3,450 per ounce on safe-haven demand. Several central banks, including those in Norway, Sweden, Switzerland, and Japan, are set to decide on interest rates this week, adding to the market’s cautious yet resilient tone.