Markets moved cautiously into the new week as investors weighed an escalating standoff with Iran, a deepening trade impasse between the United States and Canada, and fresh concerns over the pace of China’s economic growth. The combination of geopolitical and macroeconomic headwinds left sentiment mixed across Asia-Pacific markets on Monday, with early moves showing how closely regional assets are tracking developments well beyond the region.

Iran remained the dominant theme. Treasury Secretary Scott Bessent is due to unveil what he has called the toughest sanctions in history against Tehran, part of the broader economic pressure campaign the Trump administration has described as an economic D-Day. Iran’s Supreme National Security Council secretary, Mohsen Rezaei, warned that any country cooperating with the sanctions would be treated as committing an act of war and said Tehran could halt all oil exports through the Persian Gulf if the pressure campaign continues. Separately, Rezaei suggested Iran could reconsider its non-nuclear posture, accusing Washington of increasing global interest in nuclear weapons.

Weekend shipping data showed fewer than 20 commodity vessels transiting the Strait of Hormuz, although the figures remain subject to revision because transponder tracking was incomplete. Oil prices eased slightly against that backdrop, underscoring how developments in the Gulf continue to influence energy markets and risk appetite at the start of the week.

The US-Canada trade relationship showed further signs of a prolonged freeze. Ottawa’s negotiating team sees little prospect of resumed talks before the US midterm elections and is preparing a domestic aid package designed to support Canadian businesses for as long as necessary, potentially outlasting Trump’s entire term. US Trade Representative Jamieson Greer said it is hard to say when talks might resume and confirmed that none are currently scheduled, a stance that mirrors Ottawa’s own lowered expectations. USD/CAD opened with a gap higher in early Asia trade, reflecting the deteriorating outlook for a near-term resolution.

Elsewhere, Goldman Sachs flagged renewed stimulus risk in China after growth slipped further below Beijing’s annual target, reviving expectations for monetary easing even as officials have so far signaled only incremental support measures. That keeps China in focus for regional markets because weaker growth readings can feed into expectations for policy support, trade demand, and broader Asia-Pacific sentiment.

In the United States, Minneapolis Fed President Neel Kashkari used weekend remarks to downplay concerns over rising Treasury yields, saying the bond market continues to function well despite the recent climb in borrowing costs.

In New Zealand, retail sales contracted 0.5% in the second quarter, the first quarterly decline since the third quarter of 2024, ahead of the Reserve Bank’s September 2 meeting, where a rate hike is expected.

Asia-Pacific equities opened broadly lower on the combined weight of these developments. South Korea’s KOSPI opened down 0.7% and fell as much as 3% intraday, while Japan’s Nikkei 225 opened down 0.2%.

Gold traded volatile through the session but ultimately rose to a more than three-month high as investors sought safety amid the accumulating geopolitical and macro uncertainty.

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