Asian Markets Rally on US-Iran Pause, Plunging Oil Prices: July 27, 2026 Recap

Oil Price Plunge Provided Immediate Relief

The de-escalation sent oil prices into a tailspin. Brent crude fell as much as 7.4% to below $90/barrel on Monday, before paring some losses . This was a dramatic move from the elevated levels above $100/barrel seen during the worst of the conflict . The drop directly eased input cost and inflation concerns for Asian import-dependent economies, especially India, where the Sensex rallied nearly 700 points and the Nifty rose 0.96% to 23,995.95 . Indian markets had been in a five-day losing streak before Monday .

Regional Performance: Mixed but Mostly Green

The rally was broad but not universal:

• Australia: S&P/ASX 200 rose 0.9%
• South Korea: Kospi gained 0.68%
• Japan: Topix was up 0.4%, but the Nikkei 225 slipped 0.26%, reflecting persistent tech exposure concerns
• India: Nifty ended at 23,995.95, up 0.96%, halting a five-day losing streak

Adding a local policy variable, the Monetary Authority of Singapore (MAS) tightened policy "very slightly" in anticipation of inflation pressures, affecting Southeast Asian markets .

Semiconductor Sector Weakness Remains a Drag

Despite the broader relief rally, semiconductor stocks continued to face headwinds. The chip sector experienced a severe selloff through July, triggered by skepticism about whether AI-driven capital expenditure can sustain current valuations . Intel reversed initial gains to close down 7.89% on July 24, as investors questioned foundry customer commitments and AI spending sustainability . SK Hynix suffered its largest one-day drop of 15.4% in mid-July . The selloff had erased over a trillion dollars in market cap at its peak, and investor confidence in the AI narrative remains fragile . Some chip stocks recovered on Monday, but the sector remains the key point of vulnerability in Asian tech indexes .

FOMC Meeting (July 28–29): The Dominant Policy Event

Markets widely expected the Fed to hold rates steady at 3.50%–3.75% for the fifth consecutive meeting . The CME FedWatch Tool showed a near-zero probability of a rate cut and a meaningful but not dominant chance of a hike—probabilities varied, with some sources showing odds of a 25-basis-point hike at about 34.7% as of late July , while others showed higher probabilities of holding . The relief from lower oil prices reduced the urgency for a hawkish Fed stance, but markets were hyper-focused on Chair Kevin Warsh's language on the outlook . UOB strategists expected an extended pause through 2026 .

Ongoing Risks: Tariff Angst and AI Profit Doubts

Beyond geopolitics, markets continued to weigh renewed U.S. tariff uncertainties. A "grace period" of 10.0–12.5% tariffs on 60 countries expired, bringing trade policy risk back into focus . Lingering questions about AI-sector profitability and the sustainability of capital expenditure remained unresolved . The July selloff in semiconductors underscored how fragile investor confidence in the AI narrative had become .

Key Takeaway

Monday's relief rally in Asian markets was real but conditional. The U.S.-Iran pause and cheaper oil provided a necessary reprieve, but they did not resolve the deeper tensions—tariff uncertainty, AI profit doubts, and the risk of renewed Middle East hostilities. The FOMC decision and commentary on July 29 would set the tone for the remainder of the week.