Oil rises on Middle East tumult, yen firms after BOJ hold

Stocks held their ground and oil rose on Tuesday as investors weighed geopolitical maelstrom in the Middle East, while the yen firmed after a hawkish split at the Bank of Japan, underlined growing fears over inflation fuelled by the war. The BOJ, in an expected move, left short-term rates unchanged at 0.75% but three of the nine-member board proposed hiking, in the first of several central bank meetings this week that could shed light on the impact of the conflict. Markets will parse comments from Governor Kazuo Ueda at a press conference at 0630 GMT to gauge how the protracted Iran war has affected the central bank's rate-hike path. "The 6–3 vote split and the stronger language on future policy adjustment suggest the bar for another hike may be falling," said Charu Chanana, chief investment strategist at Saxo, noting that the key message is that the BOJ is no longer simply waiting for inflation to become sustainable. The yen strengthened to 159.12 per U.S. dollar but was near the 160 level. A breach beyond that threshold has markets worried Tokyo might step in to support the currency. The yen has been straddling 159 since mid-March as the threat of intervention and soaring oil prices have kept the currency glued to those levels. "Dollar/yen near 160 remains a major pressure point," said Chanana. "Intervention risk may cap aggressive yen shorts, but a sustained yen recovery will need clearer evidence that the BOJ is prepared to keep tightening despite external uncertainty." Japan's Nikkei retreated from a record high hit on Monday while government bonds swung after the decision. MARKETS AWAIT CLARITY ON US-IRAN TALKS, HORMUZ The U.S. was reviewing Tehran's latest proposal to resolve the war in the Middle East, but a U.S. official said President Donald Trump was unhappy with the proposal because it did not address Iran's nuclear programme. That leaves the two-month-long conflict in a stalemate with energy and other supplies through the critical Strait of Hormuz still mainly shut, keeping oil prices well above $100 per barrel. MSCI's broadest index of Asia-Pacific shares outside Japan was down 0.42%, not far from the record high close it touched on Monday. The index is on course for a 17% rise in April after dropping 13.5% in March. The S&P 500 eked out modest gains on Monday, poised for about a 10% gain for the month. U.S. stock futures were flat on Tuesday, while European futures pointed to a higher open. The war has sent oil prices surging, accelerated inflation and cast a shadow over the outlook for global growth, with the closure of the Strait of Hormuz, which normally carries a fifth of global oil and gas shipments, a key risk. Brent crude futures rose 1% to $109.52 a barrel, near a three-week high. U.S. West Texas Intermediate was at $97.47. Oil prices are well above pre-war levels and have steadily climbed as hopes for an imminent peace deal ebb. Global monetary policy will be in the spotlight this week, with the U.S. Federal Reserve, the Bank of England and the European Central Bank due to announce policy decisions after the BOJ. All are expected to hold rates unchanged but attention will be on comments from policymakers on pricing pressure. "Monetary officials in Japan are not alone in facing the dilemma whether to tighten policy into an energy price shock that is simultaneously inflationary and growth destructive," said Fred Neumann, chief Asia economist at HSBC. "With every passing week that the Strait of Hormuz remains closed, pressure is growing on central banks to lean against mounting inflation." The euro eased to $1.17105, with the dollar index , which measures the U.S. currency against six major units, at 98.542. The dollar benefited in March from safe-haven flows as war in the Middle East erupted but shed most of those gains on hopes of a peace deal this month. It has steadied in recent days after U.S.–Iran talks stalled. Investors are also focusing this week on earnings from tech giants Microsoft, Alphabet, Amazon, Meta Platforms and Apple that will be a test for the blistering AI-driven rally in April. Anthony Saglimbene, chief market strategist at Ameriprise, said the earnings will provide the market with a real-time read on whether AI investment is translating into commercial results.