Asia open: Oil surges past $106, USD rose as Fed signals steady rates

• Brent crude oil surged above $106/bbl as the prolonged Iran conflict and continued Strait of Hormuz disruption reinforced fears of persistent global energy supply shortages and inflation pressures.
• The Federal Reserve maintained its “higher for longer” stance after stronger inflation data and elevated energy prices reduced expectations for rate cuts, while Kevin Warsh was confirmed as Fed chair, further shaping future policy expectations.
• The Trump-Xi summit kept markets cautious after Xi Jinping warned over Taiwan tensions, contributing to weakness across major Asia-Pacific equity indices despite continued resilience in US equities.
• Chart of the day: Nikkei 225 is now facing potential near-term weakness below 63,270 key short-term resistance, reinforced by a jump in oil prices.

• Trump-Xi Summit culminates with Taiwan warning: U.S. President Donald Trump and Chinese President Xi Jinping wrap up a two-day state visit featuring business deals, but Xi issued a stark warning that mishandling the Taiwan issue could push U.S.-China relations to “a very dangerous place.”
• Oil hovers above $106 on Iran war: Brent crude oil prices surged 5% over the week, hovering above $106 a barrel as the prolonged Iran conflict keeps the key Strait of Hormuz largely shut.
• Fed holds steady amid inflation shock, Warsh confirmed: Federal Reserve Bank of New York President John Williams stated there is no need right now to weigh any change in interest rate policy amid the Middle East war uncertainty. Meanwhile, the U.S. Senate approved Kevin Warsh as chair of the Federal Reserve.
• Gold set for weekly decline: Spot gold fell 0.6% to $4,619.49 per ounce, down 1.9% for the week, pressured by higher energy prices fueling fears of inflation and prolonged higher interest rates.
• US retail sales and jobless claims increase: U.S. retail sales increased by 0.5% m/m in April, in line with expectations, while initial jobless claims also increased moderately last week, pointing to a stable but inflation-pressured economy.

• Inflation and “higher for longer” rates: Higher energy prices from the Middle East war are driving up inflation, reinforcing fears that interest rates will remain higher for longer, as confirmed by NY Fed President John Williams.
• Geopolitical tensions drive commodities: The prolonged closure of the Strait of Hormuz is keeping oil prices (Brent) elevated above $106, while the US dollar’s strength makes greenback-priced bullion more expensive, leading to a weekly decline in gold.
• Sino-US relations in focus: The Trump-Xi summit brings both economic deals and geopolitical warnings, specifically concerning Taiwan, making the Asia Pacific region highly sensitive to diplomatic outcomes.

Equities: Despite global energy flows disrupting markets, the benchmark S&P 500 index extended its rally in 2026 towards the next psychological level of 7,500 and a record high.

Fixed Income: The prospect of prolonged higher interest rates, fueled by oil-driven inflation and affirmed by Fed officials, continues to exert pressure on bond markets.

FX: The US Dollar Index gained over 1% this week, supported by higher inflationary data in the US, in turn, significantly reducing Fed rate cut bets in 2026 and 2027 according to the CME FedWatch tool.

Commodities: Brent crude oil is hovering above $106 a barrel (up 5% this week). Spot gold fell 0.6% to $4,619.49 per ounce, while spot silver fell 2.8% to $81.10.

• Stock markets: Markets are closely watching the conclusion of the Trump-Xi talks in Beijing, especially after Xi’s stark warning regarding Taiwan, which could impact regional stability and equities. A stronger USD is now triggering weakness in regional benchmark stock indices at the open. NIkkei 225 (-0.8%), KOSPI (-2%), Hang Seng Index (-0.8%), China A50 (-0.3%), ASX 200 (-0.3%), and STI (-0.1%) at this time of writing.
• Currencies: The yuan is an outlier among its Asia Pacific peers; USD/CNH (offshore yuan) is trading almost unchanged at around 6.79, while AUD and NZD both decline by 0.4% against the USD, in line with lacklustre Asia Pacific equities.
• Economic Outlook: The improving regional manufacturing recovery in Taiwan and South Korea faces headwinds from expensive energy imports and a fading global risk appetite if the ceasefire is broken.

1. Conclusion of the Trump-Xi Beijing Summit Impact: USD/CNH, global equities.
2. US Industrial Production (Apr) – 9.15 pm SGT (consensus: 0.3% m/m, Mar: -0.5% m.m) Impact: USD, US stock indices

The Japan 225 CFD index (a proxy of the Nikkei 225 futures) is now staging an intraday decline of -1.7% at the opening on Friday, 15 May, Asian session.

Its price action is now breaking below a month-long ascending channel support at 61,945 from the 30 March 2026 low, which increases the odds of a minor corrective decline sequence to retrace towards its 20-day moving average.

Watch the 63,270 key short-term pivotal resistance for the next intermediate support to come in at 61,180/60,795 (also the 20-day moving average). A break below 60,795 may trigger a further intraday drop towards 59,970 next.

On the flipside, a clearance with an hourly close above 63,270 invalidates the bearish scenario to revive the bullish impulsive up move sequence towards the next intermediate resistances (new all-time highs) at 64,145, and 65,010/040 (Fibonacci extension cluster).

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