Stock markets in Asia edged lower while safe havens such as gold and the Japanese yen gained as investors remained on edge over the possible entry of the US into the week-old Israel-Iran air war.

President Donald Trump kept the world guessing about whether the United States will join Israel’s bombardment of Iranian nuclear sites, telling reporters outside the White House on Thursday, “I may do it. I may not do it.”

The Wall Street Journal said Trump had told senior aides he approved attack plans on Iran but was holding off on giving the final order to see if Tehran would abandon its nuclear program.

Japan’s Nikkei sank 0.8 per cent, with additional downward pressure stemming from a stronger yen, which reduces the value of overseas revenues for the country’s heavyweight exporters.

Taiwan’s stock benchmark slid 0.9 per cent, and Hong Kong’s Hang Seng declined 0.8 per cent.

US S&P 500 futures pointed 0.4 per cent lower, although most US markets – including Wall Street and the Treasury market – are closed on Thursday for a national holiday.

Gold advanced 0.3 per cent to $3,378 per ounce.

“Market participants remain edgy and uncertain,” said Kyle Rodda, senior financial markets analyst at Capital.com.

“Speculation remains rife – fed probably strategically by the Trump administration – that the US will intervene, something that would mark a material escalation and could invite direct retaliation against the US by Iran,” he said. “Such a scenario would raise the risk of a greater regional conflict, with implications for global energy supply and probably economic growth.”

Brent crude edged down to $76.32 per barrel, but remained not far from the 4-1/2-month peak of $78.50 reached on Friday.

The yen gained 0.2 per cent to 144.92 per dollar, while the US currency itself was also in demand as a haven, gaining 0.1 per cent to $1.1472 per euro and 0.2 per cent to $1.3398 versus sterling.

The Swiss franc edged down 0.1 per cent to 0.8193 per dollar.

The Bank of England and Swiss National Bank will both announce policy decisions later in the day, with the BOE widely expected to keep interest rates steady while the SNB is seen as likely to cut rates by 25 basis points.

Overnight, the Federal Reserve delivered some mixed signals to markets. Policymakers held rates steady, as expected, and retained projections for two quarter-point rate cuts this year.

However, Fed Chair Jerome Powell struck a cautious note about further easing ahead, saying at his press conference later that he expects “meaningful” inflation ahead as a result of Trump’s aggressive trade tariffs.

The US Federal Reserve has held interest rates steady and policy makers signalled borrowing costs are still likely to fall this year, but slowed the overall pace of expected future rate cuts in the face of estimated higher inflation flowing from US President Donald Trump’s tariff plans.

In new economic projections, policy makers sketched a modestly stagflationary picture of the US economy, with economic growth slowing to 1.4 per cent this year, unemployment rising to 4.5 per cent by the end of this year and inflation finishing 2025 at 3.0 per cent, well above the current level.

While policymakers still anticipate cutting rates by half a percentage point this year, as they projected in March and December, they slightly slowed the pace from there to a single quarter-percentage-point cut in each of 2026 and 2027 in a protracted fight to return inflation to the US central bank’s 2.0 per cent target.

Under the new projections, inflation remains elevated at 2.4 per cent through 2026 before falling to 2.1 per cent in 2027 amid largely stable unemployment.

“Uncertainty about the economic outlook has diminished but remains elevated,” the Fed said in its latest policy statement, a modification of language used in May, at a more turbulent moment in the trade debate when it said that the risk of both higher inflation and higher unemployment had risen.

Those outcomes were both embedded in the new projections, the Fed’s latest thinking about how Trump’s suite of economic policies is expected to shape the economy this year.

The 1.4 per cent growth in output this year compares to the 1.7 per cent rate seen in the last round of projections in March, and the 4.5 per cent unemployment rate expected at the end of the year is up from the 4.4 per cent projected in March.

The rate as of May was 4.2 per cent

So far, however, “the unemployment rate remains low, and labour market conditions remain solid,” the Fed said in its policy statement, which was approved unanimously.

It did not mention the sudden outbreak of hostilities between Israel and Iran and the risk that conflict posed to global oil or other markets.

Fed chair Jerome Powell is scheduled to hold a press conference later on Wednesday and is likely to speak on the issue, as well as elaborate on the central bank’s latest statement and economic projections.

The rate projections from Fed officials for this year at least are in line with recent market expectations for a quarter-percentage-point rate reduction as soon as the Fed’s September 16-17 meeting.

The central bank continues to ignore Trump’s call for immediate rate cuts, a move Fed officials feel would be counter to their effort to ensure inflation returns to their 2.0 per cent target until key tariff changes are finalised and their effects are better understood.

The Fed’s current policy rate was set in the current 4.25 per cent-4.50 per cent range in December, and policy makers have been reluctant to commit to a timeline for further cuts given the volatility of US trade policy, and the difficulty of estimating how the burden of higher import taxes will be spread among consumers, importers and producing countries.

Interest rate cuts and government first homebuyer schemes will put a rocket under property prices over the next financial year.

The value of a median house in Australia will grow six per cent to $1.26 million in 2025/26, Domain predicts in its latest price forecast report, up from an increase of four per cent the previous 12 months.

The average unit will grow five per cent to more than $680,000.

A combination of lower borrowing costs, demand-side boosts like the federal government’s promise to extend a five per cent deposit guarantee for first homebuyers, and an ongoing supply shortfall will drive prices up, said Domain chief economist Nicola Powell.

Despite governments signing up to a target of 1.2 million of new homes by 2029, no states and territories are currently on track to meet their share of new supply.

“So the pipeline of new supply is still challenged and I think that when you do add a demand policy, anything that brings even more people to market or increases how much they can spend has an inflationary impact on pricing,” Dr Powell told AAP.

Sydney is tipped to retake the mantle of Australia’s fastest-growing property market, with house prices forecast to rise seven per cent to $1.83 million.

Given its higher valuations, Sydney is more sensitive to changes in the cash rate. Markets expect the Reserve Bank to cut the cash rate another three times by Christmas.

“It’s been eye-watering for some time. It has always been, and always will be, our highest priced housing market,” Dr Powell said.

While Melbourne house prices are predicted to grow less quickly than its sunny rival at six per cent, the Victorian capital is expected to experience a larger upswing, given its recent two-year downturn.

“When you look at Melbourne’s housing market, it’s deeply underperformed relative to other capital cities. It’s been the poorest performer over the last five years,” Dr Powell said.

“We are expecting Melbourne house prices to be at a new record high by the end of next financial year, which means they are going to be moving through into a full recovery.”

Even though Melbourne’s median house price will hit $1.11 million, that’s still 63 per cent more affordable than Sydney.

Perth will join the million-dollar club by the end of the financial year, although the five per cent growth forecast is down from the seven per cent rise the previous financial year.

Growth in Adelaide house prices will slow from 12 per cent to four per cent, while Brisbane will be steady at five per cent.

Australia’s jobless rate is tipped to remain low, while those seeking new work are in line for a boost to their pay packets.

Labour force figures for May, to be released on Thursday, are tipped to show the unemployment rate hold steady at 4.1 per cent.

Economists predict about 20,000 new jobs will be added to the economy for the month, following a bumper increase of 89,000 in April.

With the labour force participation rate also set to remain unchanged at 67.1 per cent, the Australian Bureau of Statistics figures are poised to show a tightening of the jobs market.

Listed salaries have increased by 3.6 per cent for the year to May, according to a report by online job site Seek.

The site’s advertised salary index showed growth in pay rates for new positions have remained steady over the past year.

But monthly growth in May was just 0.2 per cent, the smallest one-month increase since October.

Seek senior economist Blair Chapman said the increase in wages advertised was a welcome rise.

“The growth in average advertised salaries is currently outpacing living costs, which is good news for those switching employers as they are likely gaining a real wage increase,” he said.

“This means they can purchase more goods and services or save some of their additional earnings.”

Treasurer Jim Chalmers said reducing levels of unemployment had come about while inflation had also been brought down.

“No major advanced economy has combined unemployment in the low 4s with inflation under 2.5 and three years of continuous growth,” he said in an address at the National Press Club on Wednesday.

“We know this welcome progress in the national aggregate data doesn’t always translate into how people are feeling and faring in local communities. But real wages are growing again.”

The treasurer has flagged potential tax reform during his second term in the role, which will be examined at a productivity summit to be held in Canberra in August.

“This is all about testing the country’s reform appetite,” Dr Chalmers said.

“I am prepared to do my bit, the government is prepared to do its bit, and what we’ll find out in the course of the next few months is whether everyone is prepared to do their bit as well.”

Australia’s chances of tariff exemptions remain uncertain as the prime minister returns from an overseas trip without having spoken to Donald Trump.

Prime Minister Anthony Albanese’s much-anticipated plans to hold his first in-person meeting the US president were thrown into chaos because of escalating tensions in the Middle East.

The two were expected to speak on the sidelines of the G7 in Canada during the summit’s final day to discuss trade, tariffs and defence.

But less than 24 hours before their meeting, Mr Trump revealed he had to leave early to deal with the situation between Iran and Israel.

The prime minister will fly into Sydney on Thursday without clear progress towards a trade resolution.

But Mr Albanese could get a second chance at Mr Trump within days.

The prime minister is considering going to The Hague at the end of June to attend a summit of the North Atlantic Treaty Organisation, where the US president is expected to appear.

“We’ll meet soon and I’m sure that will occur,” Mr Albanese told reporters in Calgary on Tuesday local time (Wednesday AEST).

“From time to time, meetings are rescheduled – that’s what happens.”

The prime minister is also expected to advocate for Australia’s nuclear submarine deal with the US and UK at his meeting with Mr Trump.

Mr Albanese was not the only world leader lining up to speak with the leader of the free world at the G7.

Ukrainian President Volodymyr Zelenskiy and Indian Prime Minister Narendra Modi had talks scheduled with Mr Trump the day after he left.

Mexico President Claudia Sheinbaum was also set to meet Mr Trump face-to-face for the first time that day.

Ms Sheinbaum received a call from the US president soon after news broke of his departure, but the prime minister has not received a direct call from Mr Trump.

Instead, he met with the president’s senior economic team on the day he was supposed to speak with Mr Trump.

His discussions with US Treasury Secretary Scott Bessent, US National Economic Council director Kevin Hassett and US Trade Representative Jamieson Greer involved trade, tariffs and critical minerals – which Australia has considered using as a bargaining chip in US negotiations.

The prime minister said Mr Trump’s departure was “understandable” and insisted things were progressing.

Australia’s exports to the US continue to be hit with a baseline 10 per cent tariff and its steel and aluminium products incur a 50 per cent levy.

As the threat of missiles fly overhead, Australians in Israel are vowing to continue living their lives as normally as possible in an act of defiance.

For Australian mother-of-three Emily Gian, life in the days since Israel launched strikes on Iran and triggered waves of missile fire in retaliation has been spent in and out of underground bunkers.

With only minutes to shelter as sirens signal the arrival of projectiles, sleep has come in dribs and drabs for her family.

“We could hear it so loud that my kids thought that it was near our house,” Ms Gian told AAP on Wednesday.

“It’s a really loud boom. You feel the house shake.”

But unlike earlier conflicts with Hamas, Hezbollah and the Houthis, Ms Gian said the fire from Iran came with the added fear that the nation was believed to be working on nuclear weapons.

“There’s always been a fear in Israel that an escalation with Iran is the ultimate and scariest escalation that could be,” she said.

Nevertheless, Israelis remained resilient, hardened from many years of wars and conflict, Ms Gian said.

“We’ve been told to stay close to home, and people follow the protocols, but you see people out and about trying to go about their daily life,” she said.

And she won’t flee.

Amid suggestions the US is preparing to enter the conflict, more than 1000 Australians in Israel have registered with the Department of Foreign Affairs for help to leave, while 870 Australians and family members seek help to leave Iran.

“Our plans are to stay here for now because we live here, our house is here, our life is here, our work,” Ms Gian said.

The conflict began on Friday after Israel moved to wipe out Iran’s nuclear and ballistic missile program, claiming the Islamic Republic was on the verge of developing nuclear weapons.

US President Donald Trump has since met his national security council and demanded that Iran unconditionally surrender, adding he knew where Iran’s supreme leader Ayatollah Ali Khamenei was hiding.

Iran has warned if “all-out war” if the US joins the fray.

Melbourne lawyer Leon Zweir, who is in Jerusalem attending a conference, had registered with DFAT to be repatriated but will not leave until the event ends on Thursday.

“I want to make sure I finish the conference before I leave,” he said.

He said the mood of Israelis was “resolute”, despite the missiles flying overhead.

At least 585 Iranians had been killed, mostly civilians, Washington-based organisation High Rights Activists said, while Israel said 24 civilians had been killed.

The groundwork has been laid for Australia’s most substantive attempt at tax reform in more than two decades as the treasurer promises to “grasp the nettle” on the thorny issue.

Outlining his government’s economic agenda for its second term of parliament, Jim Chalmers threw down the gauntlet to industry, media, civil society and the political class to find genuine consensus in a speech to the National Press Club.

While defending Labor’s progress, including changes to merger and competition laws, the treasurer argued Australia needed to go further to boost stagnant productivity, bring the budget into balance and make the economy more resilient.

Long called-for tax reform will be on the agenda at a productivity roundtable in August that will seek to “shape the direction for long-term economic reform”.

“This is all about testing the country’s reform appetite,” Dr Chalmers said on Wednesday.

“I am prepared to do my bit, the government is prepared to do its bit, and what we’ll find out in the course of the next few months is whether everyone is prepared to do their bit as well.”

He challenged the media not to play a game of “rule-in, rule-out”, which he said had a “cancerous” effect on policy debate and robbed the nation of the flexibility and maturity to respond to big challenges.

The only pre-conditions for reform were that proposals must be in the national interest, specific and practical, and when taken together improve the budget bottom line.

Dr Chalmers previously flagged removing onerous red tape to fix Australia’s productivity slump.

But calls for tax reform have grown louder as an ageing population erodes revenues and places increasing demands on the health and aged care budgets.

“No sensible progress can be made on productivity, resilience or budget sustainability without proper consideration of more tax reform,” Dr Chalmers said.

Reform would also be targeted at lowering the burden on personal income tax, increasing the incentive to work, simplifying the tax system and improving intergenerational equity.

Dr Chalmers did not confirm whether opposition politicians will be invited to the roundtable, but limited space in the 25-seat cabinet room will keep the attendance list concise.

The roundtable will be a “genuine attempt” to build consensus, he said, after business groups criticised 2022’s Jobs and Skills Summit as a Labor tool to rubber-stamp unions’ wishlists for workplace reforms.

The treasurer promised to consider any good ideas, but rolling back Labor’s changes to industrial relations laws – including multi-employer bargaining – won’t be on the table.

Cutting the company tax rate or providing more tax incentives for investment are expected to be at the top of priority lists for business groups after the issue was floated by Productivity Commissioner Danielle Wood.

Dr Chalmers knows intimately the challenges governments face in attempting ambitious reform.

As an adviser to then-treasurer Wayne Swan, he worked on Labor’s carbon tax that was ultimately repealed by Tony Abbott after the coalition won the 2013 election.

Dr Chalmers said he was realistic but optimistic about his chances of success.

“Let’s see what we can achieve together if we genuinely listen to each other, we genuinely try and find common ground, and try and engage in some of these difficult trade-offs,” he said.

Opposition productivity spokesman Andrew Bragg agreed it was better for all politicians to work together on fixing Australia’s economic challenges.

“I think the Australian people will get better value from all of us if we’re able to collaborate and we remain prepared to be very constructive in the upcoming process, whatever it looks like,” he said.

British inflation slowed as expected in May, pulled down by air fares that leapt in April and the correction of a tax data error, although food prices shot up at the fastest rate in more than a year.

Consumer prices rose in annual terms by 3.4 per cent in May, the Office for National Statistics said on Wednesday, just as a Reuters poll of economists and the Bank of England had predicted.

Services price inflation – a crucial metric for the BoE – cooled to 4.7 per cent from 5.4 per cent in April, matching the BoE’s forecast for May. The Reuters poll had pointed to a reading of 4.8 per cent.

Earlier in June, the ONS said April’s headline consumer price inflation reading of 3.5 per cent had been overstated by 0.1 percentage points due to an error in car tax data from the government.

April’s figures were not amended, but the correct data was used for May’s readings.

Air fares fell sharply after an Easter holiday spike in April’s readings.

The data is unlikely to shift interest rate expectations among economists and investors who think the BoE will leave borrowing costs on hold when it announces its June policy decision on Thursday.

Sterling rose slightly against the US dollar after the ONS data release.

Gas, electricity and water prices rose in April alongside higher taxes on employers, causing inflation to leap from 2.6 per cent in March. 

A rise in oil prices since the start of the Iran-Israel conflict last week could cause inflation to rise again.

Food prices rose by 4.4 per cent in the 12 months to May, the biggest increase in more than a year, the ONS said, a blow for low-income households.

Some BoE officials have said they disagree with the central bank’s key assumption reached at its May meeting that the recent climb in inflation would not have longer-running effects on pricing behaviour.

Market pricing on Tuesday pointed to an 87 per cent chance the BoE will leave rates on hold this week, with two 0.25 percentage-point cuts priced in by the 2025’s end.

The BoE lowered rates by a quarter-point to 4.25 per cent on May 8.

Electricity customers can expect a tighter safety net to protect them from unfair price hikes under changes flagged by the federal government.

In his first post-election address, Energy Minister Chris Bowen has promised tweaks to so-called Default Market Offer rules in a bid to force energy companies to compete harder for customer dollars.

The regulations were intended to establish a benchmark price to stop the worst forms of price gouging and leave the job of putting downward pressure on prices to competition between energy companies, Mr Bowen told the Australian Energy Week conference in Melbourne on Wednesday.

“However, I’ll be frank. I don’t think it’s working that way and reform is needed,” he said.

In several states, regulators variously enforce caps on what retailers can charge as a way of protecting hundreds of thousands of customers unable or uninterested in chasing a better deal.

Caps are reviewed annually to reflect the cost of generation, moving electricity around through poles and wires, and retailer spending on marketing and administration.

Mr Bowen flagged reforms to the Australian Energy Regulator’s price-setting mechanism for NSW, South Australia and Queensland to better align with Victoria’s rules.

As well as more “downward pressure on electricity bills”, he wants the pricing mechanism to better leverage the “huge uptake” of rooftop solar and batteries.

Wednesday’s move was welcomed by welfare groups, with Australian Council of Social Services head Cassandra Goldie arguing the rules should act as a “proper safety net and not a cap on market prices”.

“Large energy retailers are making enormous profits while people are struggling with energy debt, putting food on the table and keeping their homes cool in summer and warm in winter,” she said.

The Australian Energy Council, representing electricity retailers, acknowledged climbing retail costs had contributed to higher regulated prices in 2025. 

“While retail costs have been the focus, they continue to be a smaller component of customers’ bills,” the council’s chief executive officer, Louisa Kinnear said.

“As noted by the Australian Energy Regulator network and wholesale costs continue to make up the bulk of the bill and are currently 33-48 per cent and 31-44 per cent of costs respectively,” she said.

Swinburne renewable energy expert Mehdi Seyedmahmoudian was broadly in favour of the push to improve affordability but warned it could help providers keep customers.

Without the competition allowance, companies would have less incentive to spend money on advertising to attract and retain customers.

“It’s kind of indirect marketing for the energy providers,” he told AAP.

Professor Seyedmahmoudia further argued overhauling the regulated price system was just one piece of the puzzle and needed to go hand-in-hand with policies to accelerate the transition to a clean, decentralised energy system. 

“If you don’t want to face huge unaffordable energy costs in the future, or hugely unstable energy in the future… we have to make sure we can have decentralised energy systems.”

Australia’s foreign minister has urged Iran to give up its nuclear program as fears grow its conflict with Israel will intensify into full-scale war.

As speculation grows the US is preparing to enter the fray, Penny Wong said Iran had a responsibility to negotiate for a deal to end the missile attacks against Israel.

“What we want to see is this situation resolved by Iran’s actions,” she said on Wednesday.

“Iran must come to the table.

“Iran must stop any nuclear program – that is the fastest way out of danger for the globe, for the region and for the Iranian people.”

More than 1000 Australians have registered with the Department of Foreign Affairs and Trade to be evacuated from Israel.

A further 870 Australians and their family members have requested help to leave Iran as missile strikes between the two countries intensify.

The barrage of attacks has hampered evacuation efforts because of air space being closed.

Senator Wong said Australia and other allies were urging Iran to shut down its nuclear programs.

“Ultimately, the Iranian regime has to make a decision about whether it is going to continue down a path that is so perilous,” she said.

“The world has been clear that any nuclear weapons program by Iran is a risk, a threat to global peace and security, as well as the security of the region.”

The conflict began on Friday after Israel moved to wipe out Iran’s nuclear and ballistic missile program.

US President Donald Trump met with his national security council on Wednesday morning, Australian time, after claiming he knew where Iran’s supreme leader Ayatollah Ali Khamenei was hiding.

The president has demanded Iran unconditionally surrender.

Treasurer Jim Chalmers said the federal government was closely monitoring Mr Trump’s statements.

“The US president has signalled that he wants a deal,” he said.

“There is broad international support for a return to dialogue and diplomacy.

“It’s a perilous place the Middle East right now. It’s a perilous time for the global economy.”

The situation in the Middle East has also caused great uncertainty for the Iranian community in Australia, which is watching the destruction from afar.

Atefeh, who fled Iran and sought asylum in Australia more than a decade ago, has been worried sick about her family and friends left in the capital Tehran.

Her niece has sent photos of rising smoke plumes taken from a window of their family home.

“We’re the only ones here, my husband and two kids, and we can’t do anything for them,” 40-year-old Atefeh, whose surname has been withheld out of concern for her family’s safety, told AAP.

“It’s so stressful, we don’t know what’s going to happen to them.

“It doesn’t matter where you live, downtown or elsewhere, government facilities are everywhere and they’re being attacked.”

One of her relatives survived an Israeli attack on a government building he worked in because he was on annual leave, she said.

Another relative is in the thick of the turmoil, working as a firefighter on the front line.

She and her husband are agonisingly close to receiving their Australian citizenship after spending years in immigration detention centres, followed by bridging visas and permanent protection visas.

The Washington-based group Human Rights Activists said it had identified at least 585 deaths in Iran since the conflict began, while 24 people were reported killed in Israel.

It launched the air and missile bombardment after saying it had concluded that Iran, which has long threatened the Israeli state, was on the verge of developing a nuclear weapon.