Markets moved through a dense overnight news cycle, with a surprise US Treasury intervention driving much of the price action even as tensions around Iran and the Strait of Hormuz continued to build.

Axios reported that the US military has quietly operated a shipping corridor through Hormuz's southern channel, off the coast of Oman, for several weeks, citing US officials. The strait is the world's most important oil chokepoint, normally carrying roughly a fifth of globally traded oil. Between 15 and 20 tankers transit the strait nightly, with daily exports now close to 10 million barrels, roughly half pre-war volume. Some nights, as much as 15 million to 20 million barrels move out of the Gulf. The operation includes escorting loaded outbound tankers and guiding empty vessels into the Gulf to collect oil before departing.

Separately, President Trump announced what he described as sweeping new economic warfare against Iran, framing it as the most crushing economic operation ever taken against any country and warning that any nation helping Tehran evade sanctions would face severe financial penalties. Trump said the move followed Iran's failure to take the opportunity to reach a deal with the US.

Unconfirmed reports also emerged of a vessel on fire in the Strait of Hormuz. It remains unclear who struck the vessel or what type of attack was involved, and the incident does not appear to be linked to the Oman route used by the US-run corridor, but rather the Iran crossing. Oil prices traded steadily near recent highs despite the report. Gold also traded near its highs.

The dominant market driver into the Asian session, however, was the US Treasury's announcement that it would more than double its long-dated bond buybacks, a move that eased a selloff which had pushed 30-year yields to their highest level since 2007 and, with them, long-term borrowing benchmarks such as mortgage rates. The Treasury had relaunched regular buyback operations only in 2024, its first sustained programme since 2002, as a liquidity-management tool under which older, harder-to-trade securities are repurchased and funded with new shorter-dated borrowing. The dollar fell sharply during US trading hours on the news, while gold jumped higher. The intervention came against the backdrop of US national debt rising above 40 trillion dollars, although the dollar's overall ranges in Asian trade remained relatively narrow.

Asian equities rallied broadly in response. Japan's Nikkei 225 opened 461 points higher, up 0.7%, and extended gains to around 1% by the midday break, while the broader Topix rose 0.9%. South Korea's Kospi opened 3% higher and extended its advance to around 5.5%, triggering the exchange's sidecar trading halt mechanism, a rule that briefly suspends program trading after sharp moves in index futures. In mainland China, the Shanghai Composite rose 0.33% at the opening, the Shenzhen Component gained 1.03% and the ChiNext Index climbed 1.27%.

The People's Bank of China left its benchmark lending rates unchanged for a fifteenth consecutive month, holding the one-year loan prime rate at 3.00% and the five-year rate at 3.50%, in line with market expectations. The loan prime rate is set monthly by a panel of banks and serves as the pricing reference for most new loans and mortgages in China. Analysts said the steady rates suggest policymakers may lean more on accelerated fiscal measures than fresh monetary easing to support growth, with banks already contending with near-record-low profit margins. Separately, China's central bank set its daily yuan reference rate 612 pips weaker than market estimates, the largest weak-side deviation since February 27, signalling a desire to slow the currency's gains after the yuan climbed to its strongest level against the dollar in more than three years. The yuan is permitted to trade only within a 2% band either side of the official fix each day, which makes the daily setting a key instrument for managing the pace of the currency's moves.

Japan's July data also topped expectations. Exports rose 23.2% year on year, beating forecasts of 19.9% and marking a fifth consecutive month of accelerating growth, the fastest pace since October 2022. The increase was driven by a 49.1% jump in semiconductor equipment shipments tied to AI demand, a category in which Japan ranks among the world's leading suppliers. Imports climbed 27.8%, also above estimates and their highest level since November 2022. Japan posted a trade deficit of 634.5 billion yen for the month, and the deficit is expected to persist in the near term as elevated energy costs continue to weigh on import values until shipping through the Strait of Hormuz normalises, even as AI-driven export strength continues.

In Australia, employment unexpectedly fell in July and the unemployment rate rose to its highest level since late 2021, adding to signs of a cooling labour market. The data sent the Australian dollar only modestly lower. Markets are pricing in little chance of a Reserve Bank of Australia rate hike next month, though a move by year end remains regarded as close to even odds, with much depending on upcoming inflation data.