Yen Surges on Japan's Strong Wage Growth, Oil Prices Hold Firm Amid Iran Tensions

Global markets are juggling geopolitics and policy as oil prices remain elevated following fresh Iran warnings. The Brent crude price held above $97 after Iran stated it could retaliate for new attacks by targeting Gulf energy infrastructure, including US oil and gas interests.

This kept a risk premium in the energy sector, but investors were more surprised by Japan's yen, which climbed about 0.6% to roughly 153.51 per dollar. Stronger wage growth in Japan has made the Bank of Japan more comfortable raising interest rates, as it suggests households can keep spending even as borrowing costs rise.

If traders think Japanese rates will rise sooner or faster, they may unwind 'carry trades' that borrow cheaply in yen to invest elsewhere. This could push investors to hedge their Japan exposure and reduce yen-funded carry positions, supporting the yen and leading to a firmer currency.