Oil eases on US-Iran ceasefire, but supply risks linger

Oil markets opened the week under a familiar cloud. The US-Iran ceasefire once again dominated price action after a weekend of missile and drone exchanges gave way to a fresh agreement to stand down and return to talks, this time in Qatar and focused squarely on the mechanics of Strait of Hormuz passage.

The relief rally in crude was real but contained. Analysts tempered optimism about a swift supply recovery, noting that tanker backlogs, damaged infrastructure and production shut-ins mean physical flows from the Persian Gulf could remain constrained through the remainder of the year even if the diplomatic track holds. Strait traffic data reinforced the point: vessel transits through the strait fell to 48 over the June 26-28 period, down sharply from 70 on Wednesday before the latest round of strikes. Gold eased as oil's move absorbed the risk premium. At Aramco's Ras Tanura terminal, loadings continued despite a helicopter crash that killed 14 nationals on Sunday, with the cause unknown.

Elsewhere in the region, China moved on two fronts. The PBOC debuted overnight reverse repo operations, injecting 300 billion yuan without disclosing the borrowing rate, a move that wrong-footed traders expecting guidance on the new instrument's pricing. Separately, Beijing added 20 Japanese entities to its dual-use export control list, including defence research and industrial names, citing Tokyo's remilitarisation agenda.

In equity markets, South Korean shares shed more than 1% as chipmakers tracked Friday's US losses, even as President Lee unveiled a $651 billion AI and semiconductor investment programme. Japan offered a brighter domestic read: May retail sales surged 5.3% year-on-year, the strongest print since November 2023, while a draft economic blueprint laid out an ambitious 1%-plus real growth target and called on the BOJ to keep policy supportive of the government's reflation drive.

The dollar held near its best levels in nearly a year, with traders looking ahead to Friday's US payrolls report. Goldman Sachs has flagged a 40k distortion from World Cup-related hiring, which could muddy the read on labour market momentum. The yen remained under pressure after the BOJ's blueprint call for supportive policy, keeping dollar-yen near the 160 level that has drawn intervention warnings from Tokyo.

For the broader FX complex, the week's calendar is heavy on data that will test the dollar's recent run. Beyond payrolls, ISM manufacturing and services prints, along with JOLTS job openings, will shape the narrative on whether the US economy is cooling enough to justify rate cuts later this year. A hot payrolls number would reinforce the case for the Fed to hold rates higher for longer, while a soft print would revive bets on a September cut. The dollar's path through the rest of the week hinges on which story the data tells.