The Japanese yen rose against a basket of major and minor currencies in Asian trading on Thursday, beginning a recovery from a five-week low against the US dollar and heading toward its first gain in four sessions. The move was supported by bargain buying after the currency slipped into a range widely viewed as a potential trigger for Japanese authorities to intervene near the ¥160 level.

Meanwhile, the US dollar retreated from its highest level in two months, while global oil prices declined as hopes grew for a peace agreement between the United States and Iran, particularly after the announcement of a US-brokered ceasefire between Hezbollah and Israel.

Price overview

• The dollar fell 0.15% against the yen to ¥159.83, down from an opening level of ¥160.06, after reaching an intraday high of ¥160.08.

• The yen ended Wednesday down 0.1% against the dollar, marking its third consecutive daily loss, and touched a five-week low of ¥160.09 amid escalating military tensions in the Gulf region.

The ¥160 threshold

Japanese authorities continue to closely monitor currency market movements, particularly as the yen trades around the key ¥160-per-dollar level, which has long been viewed as a threshold that could prompt renewed intervention to support the currency.

Reuters previously reported that Tokyo intervened several times in late April and early May to halt the yen’s decline. However, the currency’s recovery proved short-lived. At the time, the exchange rate reached ¥159.25 per dollar, its weakest level since April 30.

Japanese officials have warned against excessive volatility in the yen and indicated that authorities could take decisive action against disorderly market movements.

Finance Minister Satsuki Katayama reiterated that the government is “prepared to take appropriate action” if currency markets experience excessive or speculative moves.

Japanese interest rates

• Bank of Japan Governor Kazuo Ueda said on Wednesday that the central bank needs to continue raising interest rates in response to economic and inflation developments.

• Ueda noted that upside risks to prices appear greater than downside risks and could materialize sooner than expected.

• Following those comments, market pricing for a 25-basis-point rate hike at the Bank of Japan’s June meeting rose from 65% to 80%.

• The Bank of Japan is scheduled to meet on June 15–16 to review monetary policy and assess developments in the world’s fourth-largest economy.

US dollar

The US Dollar Index fell around 0.15% on Thursday, pulling back from a two-month high of 99.55 and heading toward its first loss in four sessions, reflecting weaker performance against a basket of major currencies.

Beyond profit-taking, the dollar came under pressure as risk appetite improved following the announcement that US mediation had successfully secured a ceasefire agreement between Hezbollah and Israel.

Global oil prices

Global oil prices declined roughly 1.5% on Thursday, moving away from their highest levels in nearly two weeks and heading toward their first daily loss in four sessions.

The decline was driven by growing optimism that the United States and Iran could reach a peace agreement that would include reopening the Strait of Hormuz.

Iran war developments

• The Trump administration announced late Wednesday that Israel and Lebanon had agreed to implement a ceasefire to end hostilities, boosting hopes for a broader agreement to end the Iran-related conflict.

• Trump stated that Iran had agreed to abandon nuclear weapons, while cautioning that its position could still change. He also said the Strait of Hormuz would reopen “immediately” once Iran signs the agreement memorandum.

• The Republican-controlled US House of Representatives approved a resolution on Wednesday aimed at preventing President Donald Trump from continuing the war against Iran.

US stocks retreated on Wednesday, pulling back from record highs as escalating tensions in the Middle East and rising crude oil prices fueled inflation concerns and prompted investors to take profits.

Market performance

The Dow Jones Industrial Average fell 620.72 points, or 1.21%, to close at 50,687.07. The S&P 500 declined 56.06 points, or 0.74%, to 7,553.72, while the Nasdaq Composite dropped 239.92 points, or 0.89%, to 26,853.98.

All three major US indexes finished in negative territory, weighed down by losses in the financial and technology sectors. The Russell 2000 small-cap index underperformed its large-cap counterparts.

In contrast, the Philadelphia Semiconductor Index gained 1.4%, signaling continued enthusiasm surrounding artificial intelligence. However, six of the so-called “Magnificent Seven” AI-related stocks ended lower, with Meta Platforms the only gainer, rising 4.2%.

Ross Mayfield, investment strategy analyst at Baird in Louisville, Kentucky, said AI stocks are trading in a world of their own, largely ignoring macroeconomic and geopolitical risks within certain limits. He added that investors continue to favor these stocks, especially on days when the broader market appears less attractive.

The software and services index fell 4% after facing pressure in recent months amid concerns about the impact of artificial intelligence on the sector.

Middle East tensions

Tensions in the Middle East intensified as the United States and Iran exchanged a new round of airstrikes, testing an already fragile ceasefire.

Oil prices rose, raising concerns that higher energy costs could evolve into a broader and more persistent inflationary wave.

Bill Northey, chief investment officer at US Bank Wealth Management in Montana, said the market remains caught between strong US economic fundamentals and concerns that a prolonged Middle East conflict could create downside risks.

He added that the key factor for inflation expectations is the duration of the Strait of Hormuz closure, noting that a prolonged disruption would reduce the likelihood of Federal Reserve rate cuts in 2026.

Financial markets are now pricing in a 41.1% probability of a Federal Reserve rate hike following the December meeting, up from just 9.1% a month ago, according to CME’s FedWatch Tool.

Meanwhile, New York Federal Reserve President John Williams reiterated that the central bank does not need to adjust interest rates despite upside inflation risks, arguing that monetary policy remains “in the right place.”

Economic data showed that the US labor market remains stable and the services sector continues to expand. However, input costs stayed elevated, while business spending plans appeared subdued amid rising energy prices and ongoing geopolitical uncertainty.

The Federal Reserve’s Beige Book also indicated that economic activity accelerated in recent weeks, while employment remained largely stable. However, the impact of higher energy prices linked to the war was described as widespread.

Among the S&P 500’s eleven major sectors, technology and financials posted the steepest declines, while energy stocks outperformed thanks to higher oil prices.

In the semiconductor sector, shares of Marvell, Intel, Qualcomm, and Sandisk gained between 3.7% and 6.7%.

Broadcom, however, fell 4.5% in after-hours trading following the release of its earnings results.

GameStop surged 6% after the original meme-stock company reported higher quarterly revenue and announced a $2 billion share repurchase program.

At the same time, sources told Reuters on Tuesday that Elon Musk’s SpaceX plans to price its initial public offering at $135 per share, aiming to raise a record $75 billion.

The S&P 500 recorded 33 new 52-week highs and 19 new lows, while the Nasdaq posted 90 new highs and 137 new lows.

Trading volume on US exchanges totaled 19.81 billion shares, compared with an average of 20.12 billion shares over the previous 20 full trading sessions.

Most cryptocurrencies declined on Wednesday as tensions intensified in the Middle East and investors awaited key US economic data that could strengthen expectations of a Federal Reserve rate hike rather than a rate cut, amid inflationary pressures linked to the ongoing conflict.

As of 21:33 GMT, Ethereum was down 5.9% on CoinMarketCap, trading at $1,801.4.

Middle East developments

Iran launched ballistic missiles toward neighboring countries in the region, including Kuwait and Bahrain, resulting in one death and dozens of injuries, according to Kuwaiti authorities and state media. Meanwhile, US forces carried out strikes on Iran’s Qeshm Island.

Bob Yawger, director of energy futures at Mizuho, said the prospects for a ceasefire appear to be fading, adding that the current trajectory points toward further deterioration.

US President Donald Trump stated that negotiations are still ongoing. However, Iran’s semi-official Tasnim News Agency reported on Wednesday that Tehran has not responded to the United States in recent days and that indirect communications through mediators have been suspended until Iran’s conditions regarding a halt to fighting in Lebanon are met.

Israel continues its largest military incursion into Lebanon in 25 years, in a conflict that has been ongoing since March 2, when Hezbollah opened fire in support of Iran.

In a podcast interview published Wednesday, Trump said Iran had agreed not to possess nuclear weapons and that Supreme Leader Ayatollah Mojtaba Khamenei is participating in the negotiations.

The Fed and inflation

Federal Reserve Chair Kevin Warsh pledged on Tuesday to follow the “best traditions of the Federal Reserve” in his opening remarks at the start of his four-year term, while also promising a comprehensive review of potential reforms going forward.

Meanwhile, Cleveland Fed President Beth Hammack said the US central bank may soon need to raise interest rates if already elevated inflationary pressures continue to intensify.

Markets are also focused on Friday’s US nonfarm payrolls report for May, which could provide further clues about the future direction of Federal Reserve monetary policy.

The ADP National Employment Report showed that US private-sector employment increased by more than expected in May.

India’s LNG imports are rising sharply even as Asian natural gas prices remain at their highest levels in years, a trend that runs counter to the broader regional pattern, where elevated prices have pushed many countries to reduce demand, switch to coal and nuclear power, and implement energy-saving measures.

After Qatar halted natural gas production on March 2 and the Strait of Hormuz was effectively closed around the same time, Asia lost between 5.5 million and 6 million tonnes of LNG supply per month, equivalent to roughly one-quarter of regional export flows before the crisis.

Asian LNG imports fell to 18.8 million tonnes in April, the lowest level since 2020, while Asian gas prices surged from $10.4 per million British thermal units before the crisis to $25.3 by late March.

South Korea reduced its LNG imports by around 1 million tonnes per month between February and April, while Japan cut purchases by 1.5 million tonnes per month over the same period.

India, however, moved in the opposite direction. After imports declined from 1.9 million tonnes in February to 1.67 million tonnes in March, they rebounded to 2.1 million tonnes in May.

The recovery is particularly notable because India lost its most important traditional supplier. Qatar accounted for 11.2 million tonnes of India’s 25 million tonnes of LNG imports in 2025, representing roughly 45% of total imports and making it by far India’s largest supplier.

With Qatari LNG largely disappearing from India’s import flows, New Delhi moved to replace lost volumes with cargoes from Oman, Nigeria, and the United States.

US LNG exports to India increased more than sixfold, rising from 137,000 tonnes in January to 907,000 tonnes in May, making the United States India’s largest LNG supplier.

Nigeria also doubled monthly shipments to 480,000 tonnes in May, while Oman averaged roughly 500,000 tonnes per month during March and April before easing to 300,000 tonnes in May.

Weather, not structural demand, is driving the surge

India’s renewed appetite for LNG is not being driven by structural growth in gas demand but rather by extreme weather conditions.

Electricity consumption jumped more than 11% year-on-year to 164.98 billion kilowatt-hours in May 2026 as temperatures exceeded 45°C across large parts of the country, making air conditioners and desert coolers essential.

Peak electricity demand reached record highs on four consecutive days between May 17 and May 21, culminating in an all-time high of 270.82 gigawatts on May 21, surpassing the previous record of 250 gigawatts set in May 2024.

The heatwave exposed a key weakness in India’s rapidly evolving renewable-energy system. The country now has abundant solar generation during daylight hours but lacks sufficient storage capacity after sunset.

India’s installed solar capacity has expanded rapidly, reaching 154.2 gigawatts by April 2026.

This growth reflects a range of government initiatives, including rooftop solar incentives, large-scale solar parks, and support for domestic solar panel manufacturing.

The result is that daytime electricity prices often approach zero when solar generation is abundant.

However, battery and storage infrastructure has not kept pace. Excess solar power generated during the day cannot be stored efficiently to meet evening and overnight demand.

As temperatures remain elevated after sunset, cooling demand stays high, causing electricity prices to spike.

On May 21, the day of record electricity demand, India faced a nighttime power shortfall of 2.5 gigawatts.

LNG becomes an emergency solution despite high costs

At precisely these moments, LNG-fired power generation is brought online despite its poor economics.

In early April, India’s Ministry of Power instructed all gas-fired power plants to prepare for operation during electricity shortages linked to heatwaves.

Much of India’s gas-fired generation fleet had been idle for commercial reasons, as the country remains a major coal producer and has long relied on domestic coal for power generation.

Coal alone supplies roughly two-thirds of electricity demand, while thermal generation accounted for about 71% of power production in May, most of it from coal-fired plants.

Gas-fired generation contributes only around 10 gigawatts during peak periods, despite having available capacity of roughly 20 gigawatts. This represents about 4% of installed capacity and roughly 1.5% of actual electricity output.

Power shortages typically occur at the margins rather than throughout the day, making gas valuable despite its high cost.

Gas plants can be activated for short evening periods, unlike coal plants, which are better suited for continuous baseload generation.

Although Asian gas prices remain near $18 per million British thermal units, making gas-fired generation largely uneconomic, government arrangements allow Grid India to schedule gas plant operations several days in advance, effectively using them as emergency reserve capacity.

Coal and hydropower are not enough

Coal plants cannot resolve all bottlenecks because they are already carrying most of the load, while about 2.1 gigawatts of coal-fired capacity is currently unavailable due to maintenance and outages.

Other facilities also face logistical constraints and limitations on how quickly output can be increased.

Imported-coal plants, many of which are located along the coast and typically operate at low utilization rates outside peak-demand seasons, have already increased production. As a result, India usually sees a seasonal rise in coal imports during late spring and summer.

Hydropower, another flexible generation source, faces a timing problem.

Large hydropower facilities account for around 51 gigawatts, or roughly 10% of installed capacity, and can ramp output more quickly than coal or gas without fuel costs.

However, India is currently in the pre-monsoon period, when reservoirs have already been partially depleted.

On May 30, hydropower generation stood at 15 gigawatts, about 18% below the target set by the Central Electricity Authority.

Normally, the monsoon season—which provides roughly 70% of annual rainfall—would replenish reservoirs and help ease the strain on the power system.

This year may be different.

A developing Super El Niño event is expected to weaken the monsoon, potentially resulting in the lowest rainfall levels in 11 years and delaying the onset of rains until late June.

Lower rainfall would prolong high temperatures and increase concerns that electricity shortages could persist for an extended period.

LNG becomes the fuel of the summer power crisis

All of this leaves LNG as the marginal fuel supporting India’s summer electricity system.

In theory, India could double gas-fired generation from the current 10 gigawatts to around 20 gigawatts.

With temperatures over the past two months running roughly two degrees Celsius above seasonal averages, LNG purchases could remain elevated throughout June and July.

The irony is that India is importing more LNG not because gas has become cheaper, but because alternative options face severe constraints.

Across most of Asia, high LNG prices are destroying demand. In India, however, extreme heat, the gap between solar generation and storage capacity, and the need for reliable nighttime electricity are keeping gas demand alive.

Until New Delhi develops sufficient storage capacity to support its solar boom, it is likely to continue buying expensive LNG to get through India’s hot and dark summer nights.