The Japanese yen weakened against a basket of major and minor currencies in Asian trading on Monday, resuming its decline against the US dollar after a two-day rebound, as renewed military tensions between the United States and Iran around the Strait of Hormuz boosted demand for the US dollar as a preferred safe-haven asset.

At the same time, rising global oil prices have intensified concerns over inflationary pressures in Japan, increasing expectations that the Bank of Japan may be forced to raise interest rates in the near term, with investors awaiting further economic data from the world's fourth-largest economy.

The Price

• The US dollar rose around 0.3% against the yen to ¥162.17, from Monday's opening level of ¥161.71, after touching an intraday low of ¥161.62.

• The yen ended Friday's session up 0.45% against the dollar, posting its second consecutive daily gain and its strongest daily advance in about 10 days after the Japanese government encouraged pension funds to increase investments in domestic assets.

• The yen lost 0.2% against the dollar last week, marking its third weekly decline in a month, as concerns over the interest rate gap between Japan and the United States continued to weigh on the currency.

US dollar

The US Dollar Index rose 0.25% on Monday, extending its gains for a second consecutive session as the greenback strengthened against a basket of major global currencies.

Demand for the dollar as a safe-haven asset picked up again as military tensions between the United States and Iran escalated over control of the Strait of Hormuz, raising fears that the framework agreement could collapse and direct confrontation between the two countries could resume.

Global oil prices

Oil prices surged more than 4% at the start of Monday's trading, putting crude on track to reach its highest levels in several weeks after Iran announced the closure of the Strait of Hormuz, fueling concerns over potential supply disruptions from the Gulf region.

Latest developments in the Iran conflict

• The US Central Command (CENTCOM) launched a third wave of intensive airstrikes along Iran's coastline.

• The latest US strikes followed attacks by Iran's Islamic Revolutionary Guard Corps Navy on commercial vessels in the Strait of Hormuz.

• Iran expanded its military operations against Gulf states following the US strikes and announced the closure of the Strait of Hormuz.

• President Donald Trump said the Strait of Hormuz is "open and will remain open" through the use of military force, while the US Treasury revoked temporary licenses allowing Iranian oil sales.

• Iran's Foreign Ministry accused Washington of undermining diplomatic efforts and violating the terms of the framework agreement.

• Iranian Parliament Speaker Mohammad Bagher Ghalibaf declared that the era of "unequal agreements" is over and warned that Washington would "pay the price."

Japanese interest rates

• As global oil prices climbed, markets increased the implied probability of a 25-basis-point Bank of Japan rate hike at an upcoming meeting to above 30%.

• The probability of a 25-basis-point rate hike at the October meeting has risen to above 85%.

• Investors are awaiting additional data on inflation, unemployment, and wage growth in Japan to reassess those expectations.

Oil prices rose on Friday and remained on track for strong weekly gains as concerns over energy supplies persisted following renewed hostilities between the United States and Iran, which have disrupted shipping through the Strait of Hormuz.

Brent crude futures rose 60 cents, or 0.8%, to $76.90 a barrel by 11:31 GMT, while US West Texas Intermediate (WTI) crude gained 46 cents, or 0.6%, to $72.54 a barrel.

On a weekly basis, Brent is on track to gain nearly 7%, while WTI is set to rise around 6%.

"The market has pulled back from the highs reached earlier this week, but the geopolitical risk premium remains elevated because traffic through the Strait of Hormuz has nearly come to a standstill, and there is still no clear indication of when normal shipping operations will resume," said Vandana Hari, founder of Vanda Insights.

Shipping disruption in the Strait of Hormuz supports prices despite easing military escalation

The latest developments followed Iranian military strikes on Thursday targeting US military infrastructure in Gulf states in retaliation for American attacks on Iran's southern and eastern coastal provinces, adding further strain to the fragile ceasefire agreement.

In a separate development, Iranian media reported several explosions in southern Iran, including in the Bushehr area, home to one of the country's nuclear power plants.

The International Energy Agency said in a report released on Friday that the latest escalation between the United States and Iran could undermine its previous expectations of a sizeable oil market surplus next year.

The conflict has also delayed the full reopening of the Strait of Hormuz, through which around 20% of global daily oil and liquefied natural gas supplies passed before the war began on February 28.

Giovanni Staunovo, analyst at UBS, said the absence of additional US strikes on Iran overnight put some pressure on oil prices, although the continued slowdown in shipping flows through the Strait of Hormuz limited the downside.

Ship-tracking data showed that liquefied natural gas carriers continued transiting the strait in recent days, although overall daily shipping volumes remain well below normal levels.

US President Donald Trump said this week that he does not believe the war will resume, adding that "any developments that do occur will end very quickly."

"Although the United States has intensified its attacks on military targets inside Iran, markets have taken some comfort from the Trump administration's decision to avoid targeting Iran's energy infrastructure," said Daniel Hynes, Senior Commodity Strategist at ANZ.

Separately, the International Energy Agency lowered its forecast for Russian oil production, citing Ukrainian attacks on Russia's energy infrastructure that are expected to weigh on output in the coming months.

Wall Street's major indexes were little changed on Friday as investor attention shifted to the upcoming Nasdaq debut of South Korean chipmaker SK Hynix, while concerns over the latest developments in US-Iran tensions took a back seat.

Focus shifts to semiconductor sector ahead of the biggest listing since SpaceX

The artificial intelligence sector is in the spotlight ahead of the US listing of the South Korean memory chip giant, in what is expected to be the world's largest equity offering since SpaceX's record-breaking IPO last month.

SK Hynix raised approximately $26.5 billion on Thursday after pricing its American depositary receipts (ADRs) at $149 per share. Pre-market trading indicated the stock could open at $176.01, nearly 18% above its offering price.

"We've heard that demand for SK Hynix shares significantly exceeded supply, and there is tremendous appetite for the stock," said Kathleen Brooks, Research Director at XTB. "I don't think the listing will create any market disruption or downside volatility. Instead, it could provide a positive boost for semiconductor stocks heading into the weekend."

Semiconductor companies have been among the biggest beneficiaries of this year's AI-driven rally, supported by expectations of sustained spending by major cloud computing firms. However, concerns over elevated valuations and profit-taking have recently increased volatility across the sector.

Chip stocks came under modest pressure during Friday's session, with Micron Technology falling 1.6% after jumping 4.5% in the previous session, while the Philadelphia Semiconductor Index (SOX) slipped 0.5% in choppy trading.

Meanwhile, Meta Platforms climbed 6.1%, extending its recent gains and helping lift the communication services sector by around 0.9%. Eight of the S&P 500's 11 major sectors traded higher during the session.

Markets await inflation data and earnings season amid lingering geopolitical risks

As of 9:50 a.m. ET, the Dow Jones Industrial Average was up 35.60 points, or 0.07%, at 52,523.01.

The S&P 500 gained 11.18 points, or 0.15%, to 7,554.82, while the Nasdaq Composite rose 13.40 points, or 0.05%, to 26,220.29.

Both the S&P 500 and Nasdaq remain on track to finish the week higher, while the Dow appears set to snap a four-week winning streak.

Geopolitical risks continue to linger after Iranian forces launched attacks on US military facilities in Gulf states on Thursday in response to American strikes on military targets in Iran's eastern and coastal provinces.

The latest escalation revived concerns about the potential inflationary impact of the conflict. However, New York Federal Reserve President John Williams said on Thursday that he does not expect Middle East tensions to trigger a sustained increase in energy prices over the remainder of the year.

Investors are now looking ahead to next week's US June inflation report, which could provide fresh guidance on the outlook for monetary policy. Federal Reserve Chair Kevin Warsh is also scheduled to testify before the US House Financial Services Committee.

According to LSEG data, markets are currently pricing in at least one 25-basis-point Federal Reserve rate hike by the end of 2026.

Among individual stocks, Delta Air Lines fell 2.5% despite issuing third-quarter earnings guidance that exceeded market expectations.

Meanwhile, cryptocurrency-related stocks advanced alongside Bitcoin, with Strategy gaining 5% and Coinbase rising 3.1%.

With the second-quarter earnings season set to begin next week, LSEG analysts expect S&P 500 companies to report annual earnings growth of 24%, with technology firms accounting for the largest share of that increase.

Market breadth remained positive, with advancing stocks outnumbering decliners by 1.79-to-1 on the New York Stock Exchange and by 1.08-to-1 on the Nasdaq. Neither the S&P 500 nor the Nasdaq Composite recorded a new 52-week high or low during the session.

Macquarie said the rally in copper prices remains intact, although it is becoming increasingly disconnected from underlying market fundamentals, as investor optimism continues to outpace signs of weak physical demand and a persistent global supply surplus.

Copper climbed to $6.27 per pound on Thursday, equivalent to more than $13,800 per metric ton, gaining 2.6% by midday trading in New York.

The advance was supported by lower oil prices after US President Donald Trump said Iran had returned to the negotiating table, as well as renewed US tariff threats after the Commerce Department announced plans to introduce a mechanism that would expand tariffs of up to 50% to cover a broader range of fabricated copper products by the end of fiscal 2026.

Speculation and tariff expectations continue to drive prices despite supply surplus outlook

In a new commodities report titled *Spinning Plates*, Macquarie analysts based in London, Shanghai, and Singapore argued that the copper market is not facing a supply shortage. Instead, they expect global surpluses to persist over the coming years, suggesting the world is unlikely to face a near-term shortage of the metal.

The report noted that visible copper inventories have increased by more than 870,000 metric tons since the beginning of 2025, including 444,000 tons added last year and another 429,000 tons so far in 2026.

London Metal Exchange (LME) inventories have climbed to their highest level in eight years, while COMEX inventories have reached record highs. In addition, Macquarie estimates that around 550,000 metric tons of copper are being held outside exchanges within the United States.

The bank said copper prices rose from below $12,000 per metric ton in late March to more than $14,000 by the end of May before easing slightly, adding that the rally has been driven by investment positioning, short covering, and tariff-related trade flows rather than a genuine shortage of supply.

The widening price premium between the Chicago Mercantile Exchange (CME) and the London Metal Exchange (LME) has also encouraged large volumes of copper to flow into the United States as traders position for the possibility of additional US trade measures.

Macquarie believes the most likely scenario is that continued uncertainty will keep substantial copper inventories inside the United States, creating an artificial perception of tight supply in the rest of the global market.

Chinese demand slows while sizeable surpluses are expected in coming years

The report said Chinese buyers have begun scaling back purchases at current price levels, with seasonal inventories rising sharply despite lower imports and higher exports. It also noted that the usual pace of inventory drawdowns ended earlier than normal.

Outside China, the bank described demand as still weak, with spot premiums remaining below annual contract levels.

On the supply side, Macquarie said mine production continues to disappoint expectations after the world's 17 largest copper producers cut their combined production targets by 199,000 metric tons to 13.8 million tons.

The largest disruptions came from the Kamoa-Kakula and Grasberg mines, where production recovery and expansion plans have been delayed.

Ivanhoe Mines said this week that production at its Democratic Republic of Congo operation will increase during the second half of the year, but maintained its 2026 production guidance at between 290,000 and 330,000 metric tons, well below the more than 500,000 tons expected before the May 2025 flooding.

Freeport-McMoRan had originally targeted copper production of 771,000 metric tons at Grasberg this year, but landslides disrupted operations, with the company now expecting a full recovery only by the end of 2027.

Macquarie forecasts mine supply growth of 1.3% this year and 4.4% in 2027, assuming the Cobre Panamá mine resumes operations during the second quarter of 2027 and gradually ramps up to an annual production rate of 385,000 metric tons within six months.

On the demand side, the bank lowered its 2026 global copper demand growth forecast to 1.8% from 2.0%. It also reduced its China demand growth forecast to 1.1% and cut its projection for demand growth outside China to 2.6%.

The bank expects global demand growth to improve to 2.2% in 2027 as markets outside China recover, although continued weakness in China's property sector is expected to remain a drag on consumption.

Macquarie also expressed skepticism about the scale of near-term copper demand generated by artificial intelligence projects, arguing that while data centers have boosted investor sentiment, project delays caused by local opposition, electricity grid constraints, equipment shortages, and the growing adoption of optical networking technologies could make AI-related copper demand smaller and slower than markets currently anticipate.

Despite its cautious short-term view, the bank remains constructive on copper's long-term outlook. It forecasts annual mine production growth of 2.8% between 2025 and 2030 and refined copper production growth of 2.4%, compared with demand growth of 2.8%, driven by electrification and the energy transition. That should return the market to balance by 2030 while highlighting the need for new mining projects.

In the near term, however, Macquarie believes oversupply will remain the market's biggest challenge. The bank estimates the market recorded a surplus of 600,000 metric tons last year and expects an additional surplus of 262,000 metric tons in 2026, even after accounting for production disruptions totaling 783,000 metric tons.

It also forecasts annual supply surpluses exceeding 700,000 metric tons in both 2027 and 2028.

Macquarie raised its average copper price forecast for 2026 to $13,165 per metric ton from $12,310 previously, citing strong price momentum and support from broader macroeconomic factors. Even so, it still expects prices to correct lower, forecasting a decline toward $11,000 per metric ton during the third quarter of 2027.

The bank also increased its long-term copper price forecast to $10,200 per metric ton in 2025 dollars.