Asia-Pacific markets were mixed on Friday as investors monitored oil prices, central bank expectations, currency moves and renewed geopolitical tensions.

Japan's Nikkei was on track for its worst week in more than a month, down around 4%, while the broader Topix was set for a weekly decline of roughly 3.5%. Rising oil prices and elevated bond yields weighed on sentiment amid the escalating Middle East standoff. South Korea's KOSPI, meanwhile, reversed early losses to trade higher on strength in chipmakers, a heavyweight sector in the index, although it remained on course for a weekly loss of around 1%.

In Japan, data released on Friday showed that July core consumer inflation — the measure that strips out volatile fresh food costs — rose 1.8% year on year, matching expectations and adding to the case for the Bank of Japan to raise rates at its September policy meeting. The reading sits just below the BOJ's 2% price target, leaving the September gathering as the next scheduled decision point for yen traders. The yen struggled to build momentum after the release, with USD/JPY straddling the 159.00 level. The currency weakened more against other major crosses than it did against the dollar itself.

Elsewhere in foreign exchange markets, the euro, sterling, the New Zealand dollar and the Australian dollar all traded higher against the greenback, with several sitting near their strongest levels in recent months as investors continued to question the durability of the US Treasury's efforts to manage bond yields. Bitcoin surged, while gold held near recent highs.

President Trump added to the week's Iran headlines on Thursday during an interview with WABC Radio, saying Tehran's capacity to produce missiles and drones has fallen sharply compared with five months ago. He described Iran as "in bad shape," citing inflation running near 300% and a currency he called virtually valueless, while reaffirming that Iran will not be permitted to obtain a nuclear weapon.

Those remarks came alongside a separate report that a senior Iranian official is preparing an economic warfare strategy of its own, aimed at using oil markets to pressure Trump ahead of November's midterm elections. The reported plan includes strikes on Gulf bypass terminals in Saudi Arabia and the UAE, along with efforts to shut down the flow of oil moving through the Strait of Hormuz via the US-backed shadow fleet, with the explicit goal of pushing US pump prices higher before the vote. The strait is one of the world's most important oil chokepoints, with roughly a fifth of global petroleum consumption normally shipped through it. Against that backdrop, oil prices held near recent highs in steady trade.

On the policy front, China's Vice Finance Minister Liao Min said Beijing will introduce additional fiscal support in a timely manner, pledging to maintain policy continuity while allocating resources over a longer cycle, as the world's second-largest economy shows signs of a broader slowdown. Markets will be watching for the size and timing of any new measures.

Separately, the Panama Canal Authority said it will cap daily vessel transits from early September, reversing an earlier pledge not to restrict passage, as it prepares for what it expects to be a longer and more severe El Niño season than in past years. The waterway, which carries roughly 5% of global maritime trade, last imposed daily transit caps during the 2023–24 drought before easing the limits as water levels recovered.