On the data front, manufacturing momentum softened in March, with PMI readings hovering near stagnation as demand weakened, while February’s trade surplus narrowed amid slower exports and still-elevated imports. Sectoral losses were led by non-cyclicals, property, and healthcare, partially offset by gains in cyclicals, industrials, and energy. Notable decliners included GojekTokopedia (-3.8%), Merdeka Copper Gold (-2.5%), Charoen Pokphand (-1.6%), and Aneka Tambang (-1.4%).

The standoff has effectively constrained traffic through this key shipping corridor, heightening supply risks and bolstering safe-haven demand for the US dollar. In Australia, expectations of tighter monetary policy are firming, with markets leaning toward another rate hike at the May meeting, as elevated oil prices and a still-tight labor market continue to fuel inflationary pressures.

Analysts now expect the Reserve Bank of Australia could deliver up to three additional rate increases in 2026, potentially lifting the cash rate to 4.85%, a level last seen in late 2008.

Meanwhile, the Reserve Bank of New Zealand is widely expected to leave the official cash rate unchanged at 2.25% later this week, as policymakers weigh elevated inflation against the economic drag from surging energy prices. Governor Anna Breman recently indicated that the central bank is prepared to look through temporary, energy-driven inflation but could raise interest rates if long-term inflation expectations come under threat.

The Ministry of Electricity emphasized that lower-income households will be shielded from the impact, with no change in tariffs for residential consumption of up to 2,000 kWh per month. By contrast, rates for higher-consumption households will rise by an average of 16%, while electricity prices for commercial users across all consumption brackets will increase by roughly 20%.

Officials underscored that this targeted pricing policy is intended to balance cost pressures with the need to preserve a stable and reliable power supply for residential, commercial, and industrial consumers.

The dollar has strengthened markedly during the conflict, benefiting from its status as a safe-haven asset. At the same time, soaring energy prices are stoking inflation fears and reinforcing expectations that the Federal Reserve may postpone rate cuts or even raise borrowing costs later this year.

Separately, data released on Friday’s holiday showed the US economy added 178,000 jobs in March, almost triple the consensus forecast of 60,000. Investors now await the latest FOMC minutes for further guidance on the central bank’s policy trajectory.

The downside, however, was partially cushioned by rising crude oil prices amid escalating tensions involving U.S. President Donald Trump and Iran, which lent support to biofuel-related demand. Higher energy prices generally bolster consumption of soybean oil, a key input in biodiesel production, and this, in turn, provides indirect support to soybean prices.

At the same time, market participants remain focused on the prospects for U.S.-China trade negotiations, watching closely for any indications of stronger buying interest from China, the world’s largest soybean importer.

At the same time, President Donald Trump on Sunday issued an ultimatum to Iran, threatening strikes on Iranian oil facilities and other civilian infrastructure if the Strait of Hormuz is not reopened. Tehran rejected the ultimatum, intensifying concerns over prolonged supply disruptions.

Despite the escalating geopolitical tensions, the US natural gas market remains largely shielded from overseas supply shocks, as domestic export terminals are already operating close to maximum capacity.

Prices continued to decrease in manufacturing (-3.35% vs -3.51% in January), with notable declines in food products (-3.71% vs -5.09%), textiles (-1.05% vs -1.46%), paper and paper products (-4.48% vs -6.24%), and refined petroleum products (-16.23% vs -11.98%).

By contrast, price growth strengthened in mining and quarrying (6.37% vs 3.63%), mainly due to higher costs in other mining and quarrying activities (6.56% vs 3.35%). Producer inflation also accelerated in the supply of electricity, gas, steam, and air conditioning (1.55% vs 0.82%).

On a monthly basis, producer prices rose 0.18%, rebounding from a 0.79% decline in the previous month.

At the same time, pre-production inventories rose sharply, with the pace of stock accumulation accelerating to its fastest rate since the survey began more than 13 years ago. Hiring stayed robust, though it moderated somewhat as the build-up in backlogs became less pronounced.

On the price front, input cost inflation climbed to a new survey high, prompting firms to raise output charges at a strong pace—slightly exceeding February’s record—as businesses sought to defend profit margins by passing on higher costs to customers.

Business sentiment was broadly unchanged and remained well above its historical average, underpinned by healthy order pipelines and expectations of stronger demand in the months ahead.

His comments followed a national address last week, in which he suggested the conflict could drag on for another two to three weeks. At the same time, OPEC+ announced plans to raise production by 206,000 barrels per day in May. However, there is lingering uncertainty over how this additional supply will reach global markets while the Strait remains blocked.

The group also warned that repairing infrastructure damaged by Iranian attacks is both expensive and time-consuming, a combination that is likely to keep overall supply tight.

Lav Agarwal, Director General of Foreign Trade, said the government may further reduce import duties and regulate exports if required, in order to ensure sufficient domestic availability of essential products whose supplies have been constrained by the war. He noted that the authorities are reviewing potential duty reductions on critical raw materials and other essential goods.

The products granted temporary customs duty exemptions include methanol, anhydrous ammonia, toluene, styrene, dichloromethane (methylene chloride), vinyl chloride monomer, polybutadiene, styrene-butadiene, and unsaturated polyester resins.

His comments follow a national address last week in which he suggested the conflict could persist for another two to three weeks. At the same time, eight OPEC+ members agreed to increase production by 206,000 barrels per day in May. However, with the Strait still closed, it remains unclear how this additional supply will reach global markets.

OPEC+ also warned that repairing energy infrastructure damaged in Iranian attacks is both costly and time-consuming, a factor likely to continue constraining overall supply.

On Sunday, US President Donald Trump warned that the US could begin striking Iran’s power plants and other civilian infrastructure starting Tuesday if the Strait of Hormuz is not reopened. Tehran rejected the ultimatum and has so far kept the vital shipping channel effectively closed.

Japan remains highly exposed to disruptions in crude supplies due to its heavy dependence on oil imports from the Middle East. In response, the government has started releasing oil from strategic reserves and is seeking alternative energy sources to mitigate the impact of any prolonged supply shock.

Among individual stocks, notable gainers included Furukawa Electric (up 5.6%), SAKURA Internet (20.3%), Sumitomo Electric (4.4%), Lasertec (2.9%), and SoftBank Group (1.8%).

US equities faced heavy selling as the escalating conflict sent energy prices sharply higher, heightening expectations that the Federal Reserve could delay planned interest-rate cuts and might even raise borrowing costs this year if inflation remains elevated.

Separately, economic data released during Friday’s market holiday showed the US economy added 178,000 jobs in March, far exceeding forecasts of 60,000. The unemployment rate ticked down to 4.3%, while wage growth eased. Investors are now awaiting the latest minutes from the Federal Open Market Committee for additional clues on the central bank’s policy outlook.

Tehran has rejected the latest ultimatum and continues to launch attacks on energy infrastructure across the Middle East. Since the conflict began, silver has dropped more than 20%, as surging energy prices have intensified inflation fears and reinforced expectations of interest rate hikes. The metal has also failed to fully play its traditional safe-haven role, weighed down by forced liquidations as investors sell holdings to cover losses in other markets.

Separately, OPEC+ warned after a weekend meeting that war-related damage to energy infrastructure could have lasting effects on oil supply even after hostilities ease. The group approved an increase in output quotas to help mitigate the global supply shortfall, although Iran indicated on Saturday that Iraq would be exempt from its restrictions in the strait.

“Tuesday will be Power Plant Day, and Bridge Day, all wrapped up in one, in Iran. There will be nothing like it!!!” he wrote. “Open the fuckin’ Strait, you crazy bastards, or you’ll be living in Hell — JUST WATCH.”

His comments came after U.S. forces rescued an injured airman whose fighter jet was shot down over Iran on Friday. In response, Iran’s top military commander warned that “the gates of Hell would be opened” if the United States and Israel move forward with attacks on the Islamic Republic’s energy infrastructure.

Purchasing activity ticked up after two consecutive monthly declines, while employment stabilized following job cuts late last year. On the price front, input cost inflation accelerated to its joint-fastest pace in 18 months, driven by higher fuel and input costs associated with the conflict and a stronger US dollar. Output prices rose at the quickest rate since May 2025, though the increase remained modest and close to the long-run trend.

Looking ahead, business confidence turned negative for the first time in the survey’s history, although pessimism was limited. Only a small number of firms cited war-related uncertainty as the main reason for their downbeat expectations.

New orders stagnated, export demand recorded its largest contraction in six years, and output growth moderated. Purchasing activity slowed, yet inventories increased, suggesting only limited drawdowns of existing stock. Employment continued to rise but at a weaker rate, while supplier delivery times lengthened at the fastest pace since June 2020 amid shipping delays and higher fuel costs. Supply constraints pushed backlogs of work to their highest level since July 2018.

On the inflation front, overall input costs registered their smallest increase in a year, reflecting softer wage pressures. However, higher fuel and freight expenses drove up both purchasing and selling prices. Business sentiment fell to its lowest point since June 2020, as concerns over the regional conflict outweighed the positive impact of ongoing government spending.