Oil Slumps on Peace Hopes as US-Japan Alliance Drives Yen to Three-Month High

Oil prices plummeted on Monday amid growing hopes for a Middle East peace deal, while the Japanese yen surged to a three-month high following a confirmed joint intervention by the U.S. and Japan to support the struggling currency.

Oil Prices Plunge as Iran Peace Hopes Resurface

Brent crude futures sank by $4.50, or more than 5%, to $83.40 per barrel after U.S. President Donald Trump announced that talks with Iran are scheduled for Monday. Trump had previously called off a planned attack on Iran to pursue a deal aimed at reopening the Strait of Hormuz.

European Equities Rally on De-escalation Optimism

European stock markets jumped 0.4% to kick off August on a firm note as hopes for de-escalation grew.

■The German DAX notched an intra-day record, trading up by 1.3%.

■S&P 500 futures rose 0.5%, while Nasdaq futures gained 0.6%.

■Research from Lombard Odier Investment Managers highlights that 86% of reporting S&P 500 firms have beaten earnings expectations.

Asian Markets Struggle Amid AI Investment Skepticism

Asian stocks faltered at the start of the new month following a volatile July, as investors expressed concerns over massive capital spending on artificial intelligence and its ability to generate quick returns. Japan's Nikkei dropped 1%, while South Korea's KOSPI slid more than 5%, weighing on the MSCI's broadest index of world shares.

Joint US-Japan Intervention Sends Yen Bears Scrambling

The Japanese yen strengthened over 0.5% to 156.70 against the U.S. dollar, having earlier hit its strongest level since early May at 155.2. Japan's finance ministry confirmed a coordinated yen-buying intervention with the U.S., marking a rare bilateral action to halt the currency's slide to 40-year lows. U.S. Treasury Secretary Scott Bessent signaled potential expansion of the Fed's repurchase facility to bolster dollar liquidity, calling it an "important backstop".

From a capital flows perspective, the rapid erosion of the geopolitical risk premium in oil is triggering a short-term "risk-on" rotation. However, the structural shift lies in the currency markets. The explicit confirmation of "joint intervention" is a rare and powerful signal that acts as a backstop against yen selling pressure. More critically, Treasury Secretary Scott Bessent's comments regarding the Fed's repo facility suggest a coordinated effort to manage global dollar liquidity, reducing the threat of a funding squeeze. While Asian equities face headwinds from AI profitability concerns, the intervention floor likely marks a turning point for the yen's depreciation cycle, forcing hedge funds to unwind crowded short positions.