• Middle Eastern geopolitical tensions have risen sharply as Iran launched hundreds of ballistic missiles at Israel in retaliation for Israeli strikes, resulting in casualties and heightening fears.

• This continued war is keeping global investors in suspense, sending US stock futures lower as markets react to the uncertainty alongside shifting US trade policy and recalcitrant interest rates.

• President Trump has weighed in, calling for the withdrawal of Tehran and again asserting his resistance to Iran acquiring nuclear weapons.

• Even amidst all such global turbulence, local currency government bonds in emerging markets are witnessing increasing international investment with the yields at a seven-year low since 2022 and strong year-to-date returns.

• Partially, it is driven by a lower US dollar and investors seeking better returns beyond historically exceptional US assets.

• Goldman Sachs reported that global hedge funds posted their highest rise in Asian volumes of trade in over five years last week, longing positions in Japan, Hong Kong, Taiwan, and India while shorting Chinese shares.

• The resumption in Asian investment is due to hope for de-escalation in the US-China trade tensions and the new market-friendly South Korean president, following a de-dollarization trend.

• Meanwhile, the government debt market of Japan is under the spotlight as record-high super-long JGB yields prompted the Bank of Japan to hint at a slower pace of quantitative tightening to deal with Japan’s enormous debt.