Summary:
- The Trump administration announced Israel and Lebanon agreed to implement a ceasefire and establish security zones, contingent on a complete halt to Hezbollah fire and evacuation of its operatives from the South Litani sector; a previous ceasefire agreed last month had failed to hold
- Trump suggested a deal with Iran could come “over the weekend” while reports indicated he privately told aides he would not resume all-out war unless US troops are killed
- The US House of Representatives passed a war powers resolution to block further strikes on Iran, the first such vote of the conflict; analysts described it as largely symbolic
- Asian stocks fell Thursday morning, with Seoul and Tokyo both sharply lower as renewed Iran tensions drove a risk-off shift; the won fell sharply
- USD/JPY drifted back below 160; major FX moves were otherwise subdued
- Chinese analysts said PBoC liquidity would remain stable and ample in June despite the central bank skipping open market operations for a second day
- The New World screwworm, a parasitic fly lethal to warm-blooded animals, was found in a calf in Texas, raising alarm over the US cattle herd
Oil prices edged lower on Wednesday as a flurry of contradictory signals on the US-Iran conflict left markets unable to commit to a direction, with Trump’s weekend deal hint doing just enough to take the edge off what had been a firmly risk-off session.
The day’s dominant thread was a collision of escalation and diplomacy that has become the defining rhythm of this conflict. Iran struck Kuwait’s international airport the previous day, injuring dozens and prompting US military strikes near the Strait of Hormuz. Against that backdrop, the Trump administration announced that Israel and Lebanon had agreed to implement a ceasefire and establish security zones in southern Lebanon, contingent on a complete cessation of Hezbollah fire and the full evacuation of its operatives from the South Litani sector. It was the second such ceasefire agreement in as many months; the first did not hold. Tehran has repeatedly linked any deal with Washington to an end of fighting on the Lebanese front, making the announcement diplomatically significant even if its durability remains an open question.
Trump added to the noise in the US afternoon, suggesting a deal with Iran could materialise over the weekend. He was also reported to have told aides privately that he would not resume all-out war unless American troops were killed, a threshold that markets interpreted as confirmation the administration is tolerating ongoing skirmishing rather than seeking renewed escalation. The US House of Representatives passed a war powers resolution to block further Iran strikes, the first such vote since the conflict began in late February. The White House dismissed it and analysts broadly characterised it as performative, of no effect..
Asian markets opened Thursday in a risk-off mood. Seoul shares fell sharply and the Korean won sold off, while the Nikkei also declined, following a weak lead from Wall Street. Major currency moves were limited elsewhere, with USD/JPY drifting back below 160 by a few ticks without conviction in either direction.
In China, analysts sought to soothe domestic market concerns, stating that liquidity conditions would remain stable and ample through June despite the People’s Bank of China skipping open market operations again today, a communication exercise aimed at preventing the absence of intervention from being read as tightening.
Away from geopolitics, the US Department of Agriculture confirmed the discovery of the New World screwworm in a Texas calf. The parasitic fly, which consumes warm-blooded animals alive, had been eradicated from the United States decades ago. Its reappearance raises serious questions about biosecurity and potential exposure across the American cattle herd at a time when beef prices are already near record highs.
Still to come, RBA’s Michele Bullock, Governor, Sarah Hunter, Assistant Governor (Economic), and Christopher Kent, Assistant Governor (Financial Markets) will all speak in Australia’s parliament today. None will be dovish.
- due at 0500 GMT / 0100 US Eastern time
Bitcoin continued to drop, hard, only finding a bounce under $62K:
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