Asia sinks on Fed hold and Middle East uncertainty

June 19, 2025 (MLN): Asian equities retreated on Thursday, with Hong Kong’s Hang Seng Index leading losses across the region, as investors digested the U.S. Federal Reserve’s rate decision and remained cautious over mounting geopolitical tensions in the Middle East.

The Hang Seng dropped more than 2%, weighed down by persistent concerns surrounding China’s economic recovery and broader market sentiment.

China’s CSI 300 index also slipped by 0.78%.In Japan, the Nikkei 225 fell 0.8%, while the Topix edged 0.52% lower. South Korea’s Kospi eased 0.15%, and Australia’s S&P/ASX 200 ended flat amid a cautious trading session.

Markets remain on alert as safe-haven assets such as gold and the Japanese yen saw renewed interest, reflecting investor nervousness over the intensifying Israel-Iran conflict and the possibility of U.S. involvement.

President Donald Trump convened his national security team for the second consecutive day in the White House Situation Room late Wednesday, deliberating a potential military response amid rising tensions in the Middle East. “I may do it. I may not do it,” Trump said when asked if the U.S. would join Israel in striking Iranian nuclear facilities, leaving global markets guessing.

Meanwhile, the U.S. Federal Reserve held its benchmark rate steady at 4.25%–4.50%, a level maintained since December.

While Fed Chair Jerome Powell indicated a wait-and-see approach regarding the impact of recent tariff actions on inflation, the central bank signaled that two rate cuts remain on the table for later this year.

Overnight on Wall Street, trading closed mixed. The Dow Jones Industrial Average slipped 0.10%, closing at 42,171.66.

The S&P 500 edged 0.03% lower to 5,980.87, while the Nasdaq Composite rose 0.13% to finish at 19,546.27.

Investors remain focused on how the Fed’s next steps and the unfolding geopolitical risks may shape global risk appetite heading into the second half of the year.

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