Global markets traded cautiously as investors assessed developments across geopolitics, energy markets, bonds, currencies, and the US economy. Asian stocks pared earlier gains as South Korean technology shares reversed, while Nasdaq 100 futures also slipped. The MSCI Asia Pacific Index reduced an earlier advance of as much as 1.2% to around 0.2%, while the Kospi fell 1%.

Oil prices steadied after a three-day rally as President Donald Trump said renewed attacks on Iran would likely be short-lived and reiterated that the US controls the Strait of Hormuz. His comments eased some concerns over further escalation, while US officials said energy flows through the Strait of Hormuz remained robust. The fresh fighting had previously pushed energy prices higher and raised concerns over a prolonged conflict.

Developments surrounding Russia and Ukraine also remained in focus. Russian President Vladimir Putin said there are chances of reaching a peace agreement and that there is an opportunity for constructive peace talks. Putin said China continues to urge Russia to reach a peaceful agreement, while contacts with Washington continue and Russia remains in favour of restoring relations with the US. He also confirmed that contacts with Ukraine are ongoing.

At the same time, Russia's Defence Ministry said Russian forces had hit two Ukrainian cargo vessels in the Black Sea, according to Interfax.

In Japan, demand at a 30-year government bond auction was stronger than average as elevated yields attracted buyers. The bid-to-cover ratio stood at 3.79, compared with a 12-month average of 3.52. However, the auction tail widened to 0.28 from 0.21 previously.

The Dollar remained vulnerable as some of the world's largest pension funds and insurers have been rotating away from US assets. This shift could leave the Dollar exposed to sharper declines if investor sentiment deteriorates.

Meanwhile, representatives from major global economies agreed to lighter-touch guidelines for artificial intelligence and other emerging technologies. The agreement marked a policy win for the Trump administration and Silicon Valley.

US economic activity increased modestly over the past two months, according to the Federal Reserve's Beige Book, with data-center demand helping to drive growth.

The US labor market also remained broadly stable. Private payrolls data showed that companies added jobs at a more moderate pace in August, despite uneven hiring during the year.

Unemployment remains historically low, with recent government data reassuring some policymakers that the labor market is broadly balanced. Warsh said last week that the labor market remains consistent with full employment, allowing greater focus on inflation.

New York Fed President John Williams said there is evidence that inflation continues to ease as the impact of tariffs fades. However, he noted that higher energy prices have yet to feed significantly into other services.

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