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Japanese stocks lose gains due to Middle East War concerns
Japanese shares retreated on Tuesday as investors weren't convinced that U.S. president Donald 'Trump's remarks about delaying the targeting of 'Iran's energy infrastructure would lead to an end to the Middle East conflict. The Nikkei was up 0.3% at 51,681.73 by 0216 GMT. It had risen as high as 2.3% in the previous session. The Topix index rose 1.1% to 3,526.07 after jumping 2.6% earlier in the session. Trump postponed his threat to bomb Iran’s power grid due to what he called "productive talks" he had with unidentified Iranian officials. Iran denied that it was in talks with the U.S. This pushed oil prices up. Tomoichiro Kubota is a senior analyst at Matsui Securities. He said, "Few seem to believe that the remarks can help calm down the situation in the Strait of Hormuz and many see them as a temporary delay tactic." When the market is rising, people are quick to profit. Since its close on February 27, before the outbreak of war, the Nikkei has fallen by nearly 12%. Nikkei 225 ascended on Tuesday and 27 declined. Sumitomo Pharma, Japan's largest oil refiner, rose 4.9%. Shares of energy-related companies, such as?Eneos Japan's largest refiner, also increased. Tokio Holdings' daily limit was 6,857 yen. Berkshire Hathaway announced that it would be buying a 2.4% stake in the Japanese insurance company for $1.8 billion, as part of a new strategic alliance. Japan Steel Works was the Nikkei's largest percentage decliner, with a drop of 4.7%. Kawasaki Heavy Industries, with a loss of 3.9%, and IHI Corp, which fell by 3.5%, were also amongst those who suffered. Reporting by Satoshi Sugyama, Editing by Sherry J. Phillips and Mrigank. Dhaniwala
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WGC: Additional central banks will buy gold to counter geopolitical risk
A World Gold Council executive said on Tuesday that central banks, who had been 'absent' from the market this year, are expected to purchase gold as a hedge to geopolitical and dedollarisation risks. Shaokai fan, the global head of the world banks at the WGC, said that in recent months, central banks from Guatemala and Indonesia, as well as Malaysia, have all purchased gold. This is either after a long break or for the very first time. He said, "We've seen a phenomenon in the past few months, where new central banks or central banks who have been inactive for a while, enter the gold market." He said: "I believe that this trend will continue well into 2026." Fan added that some central banks also buy gold from small-scale producers in order to support local industry, and to prevent gold sales going to "bad actors". Fan said on the sidelines Minerals Week, in Canberra, that gold prices fell by over $1,000 per troy-ounce this month. Historical trends indicate it is partly due to margin calls and related selling. Gold's record high was only a few dollars shy of $5,600 at the end of January. Fan said that during the gold slump in October, central bankers stocked up, but it is too early to tell if this has happened with the current rout. He added that central bank 'demand for gold' may be declining because higher prices deter new purchases and increase the weight of existing gold holdings in relation to total reserves. The WGC said that it expects central banks' purchases of gold to drop to 850 tons this year from 863 tons by 2025. This is despite the fact that their buying has remained high compared to pre-2022 levels. According to WGC figures last year, central bank purchases accounted for around 17% of the total demand. (Reporting by Melanie Burton; Editing by Kevin Buckland)
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CORRECTED - Shares rise, oil prices rebound as Trump extends his Iran ultimatum
After U.S. president Donald Trump delayed the bombing of Iran’s power grid on Tuesday, fears of an even greater energy shock were eased. The markets were on a roller coaster at the beginning of the week, after Trump extended his Saturday deadline for Iran to reopen Strait of Hormuz in 48 hours by five days, citing constructive talks with unidentified Iranian official, which Tehran denied. It's a negotiation tactic... "I don't believe that the U.S. government wants to see oil priced at $150, because they caused it themselves," said Rajeev de Mello. Chief investment officer at GAMA Asset Management. The reversal of the market on Monday was quickly acted upon by traders, who sent crude futures plummeting and shares surging while the dollar, government bond yields, and other currencies fell. The majority of the movement carried over into the Asian trading session of Tuesday. MSCI's broadest Asia-Pacific index outside Japan rose 1.3% while shares in Australia increased 0.7%. Japan's Nikkei?advanced over 2% and reversed most of the 3.5% drop on Monday. U.S. Futures are little changed from Monday's closing cash session. The oil prices edged up on Tuesday, after a 10% drop in the previous session. Brent crude futures rose 1% to $100.94 per barrel while U.S. oil prices climbed 1.9% to $89.84. The movement was volatile, however, as the war in the Middle East continued and the prospect of higher energy prices for longer lingered. Chris Weston is the head of research for Pepperstone. Price action could continue to be choppy until Friday's new deadline... Participants must decide whether they see the extension as one that will bring a deal closer or simply prolong uncertainty. Expectations of a PARING RATE hike The yields on U.S. Treasuries stabilized on Tuesday, following a steep fall overnight. This was in line with the decline in global bonds yields as investors reduced their bets that major central banks would increase interest rates aggressively this year. The yield on the two-year bond was unchanged at 3.8498% after falling by more than 6 basis point in the previous session. The benchmark 10-year rate was at last 4.3400%. Although traders have priced in the small possibility that the U.S. Federal Reserve might hike rates?this year they still expect them to be held. Market expectations have been reduced for the European Central Bank to raise rates. Kit Juckes is the head of FX strategy at Societe Generale. The U.S. Dollar was in the red after falling on Monday as an increase in risk sentiment decreased demand for safe-haven currencies. The?euro was last trading at $1.1603, up 0.4% overnight. Sterling held at Monday's 2-week high and last traded at $1.3420. The dollar rose 0.04% to 158.54 yens. Data released on Tuesday revealed that Japan's core inflation rate for consumers fell below the Bank of Japan target of 2% in February, the first time since nearly four years. This complicates the efforts of the bank to justify future interest rate increases. Spot gold rose 0.6% to $4,431.65 per ounce. (Reporting and editing by Christopher Cushing; Rae Wee)
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Japan's core rate of inflation falls below BOJ target and complicates communication about rates
Data showed that Japan's core consumer price inflation in February fell below the central bank’s 2% target for the first time since nearly four years. Government fuel subsidies were used to offset the rising import costs due to a weaker yen, and the surging oil prices from the 'Iran war'. The reading will not change the Bank of Japan’s plan to tighten monetary policy, but the government’s intervention in the market to lower prices may make it more difficult for the bank to communicate as they try to increase the still low borrowing rates. Last week, the BOJ announced that it would release by summer a price indicator which removes such one-off factors from policy to measure underlying inflation. Some analysts believe this is an attempt to justify further rate increases. CORE INFLATION STILL HIGH Abhijit SURYA, senior APAC Economist at Capital Economics said that inflationary pressures were more entrenched than the headline result of February might suggest. We believe that Bank of Japan's preferred?core-inflation measure will remain above its target of 2% for the near future. The case for tightening policy is still valid. Data showed that the core consumer price index, which excludes volatile fresh food prices, increased 1.6% from a previous year in February. This was in line with the median market expectation of a 1.7% increase. The BOJ target was not met for the first since March 2022. The BOJ closely monitors a separate index that strips out both fuel and fresh food prices. This index, which is a "better indicator of demand-driven inflation", rose by 2.5% over the past year, following a 2.6% increase in January. The main reason for the drop in energy prices, which was caused by the return of gas and electricity subsidies, was the 9.1% decrease in costs. Other measures have also helped to moderate inflationary pressure. According to a government report, the gasoline tax reduction in February reduced headline inflation by 0.94%. In February, tuition fell by 9.6% on an annual basis due to increased government subsidies. Analysts say that the BOJ is likely to remove such factors from its new price index. Prices for goods and services that are not subsidised rose. Food prices, excluding volatile items such as vegetables and fruits, rose by 5.7% in Feburary after an increase of 6.2% in January. The service sector inflation rate remained at 1.4%. SUBSIDIES COMPLICATE MESSAGING The BOJ has ended its decade-long massive stimulus program in 2024, and increased rates in several steps, including in December. This was based on the belief that Japan had made steady progress towards achieving a 2% inflation goal. Kazuo Ueda, the governor of the Bank of Japan, has indicated that the bank is willing to raise rates in the future if they become more confident that the inflation rate, or the price trend, driven by domestic demand will stabilize around the 2% target. Fuel subsidies and other measures taken by the government to help cushion households from the rising cost of living have affected prices, complicating the BOJ's attempts to measure inflation. The Middle East conflict has caused a spike in crude prices. This month, the government introduced a price cut on gasoline that analysts say could reduce the core CPI by as much as 0.5%. The?BOJ is faced with a tough choice, as the war increases inflationary pressures while also hurting profits for corporations and an economy that relies heavily on fuel imports. Takeshi Minami is the chief economist of Norinchukin Research Institute. He said that if the BOJ raised rates, it could harm the economy, which was already hurt by the worsening business mood due to the conflict. We expect the BOJ will be in a waiting-and-seeing mode. (Reporting and editing by Leika Kihara)
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Fuel prices in Chile will rise as the global oil crisis strains public finances
Fuel prices will rise in Chile in the coming days after the government invoked on Monday a clause in the fuel stabilization mechanism. This was done to quickly align 'with surging international price increases, as the strained public finances are unable to absorb the shock. The Middle East war has caused oil prices to spike. Brent futures trade at around $101 per barrel, up from $70 prior to the U.S.-Israel attack on Iran last month. This led to a blockade in the Strait of Hormuz which was a bottleneck for oil shipping. Due to its lack of oil production at home, Chile is?highly exposed?to changes in international prices. The Finance Ministry announced that starting March 26, the price of 93-octane gas will increase by 370 pesos per liter ($0.41) and diesel by 580. In Santiago's capital, the price increases represent a jump of around 30% for gasoline and about 60% for diesel. Fuel stabilization funds smooth the price increases, but weekly costs have reached $140m and are expected to reach $160m if the situation persists. The ministry estimates that it would cost $4 billion to absorb the entire increase. Last week, Finance Minister Jorge Quiroz announced spending cuts of nearly $4 billion. He said that the government had inherited limited funds and strained finances when it came to power on March 11, 2011. Chile's structural deficit was 3.6% of its gross domestic product in 2010, the highest level since the pandemic. The President of the United States, Jose Antonio Kast, has said that the Fuel Stabilization Fund cannot completely isolate the country from global events. He also stated that the strain on the finances will force him to make tough decisions. Quiroz said that any decrease in oil prices would be passed on to consumers at the same speed. The government has announced measures to?mitigate the impact of rising fuel prices' by reducing the price of kerosene and public transport fares.
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Oil prices rise as markets evaluate supply risks following Iran's refusal to engage in US-sponsored talks
Prices of oil rose on early Tuesday due to supply concerns. Iran denied that it had held talks with the United States in order to 'end the Gulf War,' contradicting President Donald Trump, who claimed a deal would be made soon. Brent futures increased $1.06 or 1.1% to $101 per barrel at 0001 GMT. U.S. West Texas Intermediate rose $1.58 or 1.8% to $89.71. Crude futures fell more than 10% Monday after Trump announced he ordered a delay of five days to the attacks he threatened against Iran's nuclear power plants. He also said that the U.S. held productive discussions with unnamed Iranian officials, which had resulted in "major agreement points". Tim Waterer is the chief market analyst for KCM Trade. He said that by halting the attack on Iranian power plants, the U.S. has effectively "sucked" a large part of the "war premium" from the price of oil. The mud is causing the market to find its feet. While the missiles have been put on hold, traders are aware that the Strait of Hormuz remains far from being a "clear waterway." The war has almost completely stopped the shipments of oil and natural gas liquefied through the Strait of Hormuz. Two tankers bound to India did sail through the Strait of Hormuz on Monday. Iran's Revolutionary Guards claimed they launched new attacks against U.S. targets, and denounced Trump’s comments as “worn-out psychological operation”. Macquarie stated in a report that "even with a possible reduction in tensions following (Monday's announcement) from President Trump, Macquarie expects a price floor of $80-$90 and natural drifting back to the $110 range?until the Strait of Hormuz has been restored." Brent oil could reach $150 per barrel if the Strait of Hormuz remains closed until April. Fighting has caused damage to energy infrastructure in the region. The Iranian semi-official news agency 'Fars' reported that in the latest attacks a gas company office and a station for pressure reduction were both hit in the central city of Isfahan. A projectile was also fired at a pipeline feeding a power plant in Khorramshahr. To ease the shortages, the United States temporarily lifted sanctions on Russian oil and Iranian oil that was already at sea. According to industry sources, traders are offering Iranian crude at a higher price than ICE Brent to Indian refiners following Washington's decision. Fatih Birol, the Executive Director of International Energy Agency (IEA), said on Monday that it was consulting with Asian and European governments about possible future releases of strategic reserve "if necessary". Energy ministers and oil executives at a Houston conference warned about the long-term effects of the U.S./Israel war against Iran on the world economy. However, U.S. Energy Sec. Chris Wright played down the crisis. (Reporting from Anmol Choubey, Bengaluru. Editing by SonaliPaul)
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McGeever: Why $100 oil won't ruin the American consumer
Oil is expensive, especially in the U.S. where spending and driving are so prevalent. The average American consumer is better prepared than ever to cope with oil priced at $100 per barrel, despite the 'fears'. The U.S. household is the wealthiest it has ever been in nominal terms. In'relative terms, they have never been richer. The unemployment rate is at a historic low. And, most importantly, the share of energy and gas consumption has been historically low. It may be that U.S. equities outperformed those of their global peers after the joint U.S. and Israeli strikes on Iran in February sparked war in the Middle East. The closure of the Strait of Hormuz was also one of the most severe energy supply shocks for decades. Since then, the S&P 500 has lost 5% and Nasdaq has lost 5%. This is a big hit. More than $3 trillion has been wiped off the value U.S. stock. The pain is likely to be much worse for households and businesses in Europe, Asia, and emerging markets where benchmark indexes are down by 8-10%. 2% OF SPENDINGS ON GAS AND ENERGY The U.S. household appears to be able to withstand oil prices at the current level. According to Bureau of Economic Analysis, gasoline and energy products represented just 2% of all consumer spending during the fourth quarter of last year. This is the lowest percentage in 80 years. In 2008, oil reached a record high of just under $150. For comparison, in?2022, the U.S. crude price peaked at $130. The peak was around 6% between 1980 and 1981. It is true that the current level of 2% may rise in the future if oil prices remain high for an extended period. Even then, the majority of Americans should be able handle it. Federal Reserve data from last week revealed that household balance sheets had never been stronger. The fourth quarter of last year saw the net worth of households rise to 794%, which is the highest since early 2022. Since the 1950s, the U.S. net worth of households has been higher only three times, and all during the pandemic-distorted period 2021-22. Inequality of Energy The energy price increase is not a factor that only affects the Americans. According to the American Automobile Association, the national average gas price is now almost $4 per gallon. This represents a 35% increase in one month. Energy Information Administration estimates the average price at $3.72. This is up 27% from the start of the war - and the highest since two and a quarter years. Remember, however, that the price of gas was above $4 for six consecutive months following Russia's invasion of Ukraine in February 2022 and reached $5 that June. It's still important to remember the "energy inequality" that America faces. The lower-income households spend a greater percentage of their income on gasoline and energy. Fed study from last year revealed that 1 in 5 U.S. homes are "energy burdened" - meaning their average ratio of energy expenditure to disposable income is 25 percent, compared to only 7 percent for households not experiencing this burden. These households tend to be in the lower two quintiles. It would be political suicide for the Trump administration to attempt to portray rising energy prices in any other way than as bad news. This is especially true of a president who's approval rating is so low that the Democrats could win both houses of Congress in the November midterm elections. There may also be more pain ahead. The cost of oil could increase across the entire economy. This includes transportation, manufacturing and other industries. Trump has been scrambling for a drop in oil prices. He said earlier on Monday that military strikes against Iranian energy infrastructure and power plants would be put on hold. It is true that the situation is fluid, and Americans could quickly lose their resilience, particularly if oil prices continue to rise. For now, however, it seems that fears of $100 oil breaking the backs of U.S. consumers are overblown. You like this column? Open Interest (ROI) is your new essential source of global financial commentary. Follow ROI on LinkedIn and X. Listen to the Morning Bid podcast daily on Apple, Spotify or the app. Subscribe to the Morning Bid podcast and hear journalists discussing the latest news in finance and markets seven days a weeks.
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Austrian OMV CEO: Energy impact of Iran conflict could exceed Ukraine conflict
According to Austrian OMV's chief executive, the U.S. and Israeli 'war' on Iran could reduce global energy supply more than Russia's invasion in Ukraine in 2022. OMV CEO Alfred Stern said that the conflict in Ukraine has led to a major rerouting of energy supplies, while the war in Iran has reduced energy supplies on the global market. He said that the economic effects of this crisis can already be seen in low-income countries. The Iran War, now in its 4th week, and Tehran’s attacks against Gulf neighbors has damaged major?energy?facilities and brought shipping along the Strait of Hormuz, which is responsible for 20% of global oil?flows and liquefied gas?flows, to a near halt. Stern said that the Middle East crisis is now a physical disruption of the supply chain. Stern spoke at the CERAWeek conference on energy in Houston. "This is a more serious issue, but the main variable is how long it will take. It will have less of an impact if the time frame is limited. OMV expects to have completed by the end March a mega merger with Abu?Dhabi?Dhabi?Dhabi 'National Oil Company, creating a global chemical giant Borouge Group. The deal will combine Abu Dhabi's Borouge with Europe's Borealis and?the purchase of Nova Chemicals by Abu Dhabi wealth fund Mubadala to create BGI. Stern explained that OMV and ADNOC had agreed earlier this month to delay the listing of BGI due to unfavourable market conditions for chemicals in Asia, as well as overcapacity. Stern stated that the Middle East crisis wasn't the reason for the delay. Stern stated that OMV and ADNOC delayed the listing until 2027 depending on?market conditions. Stern said OMV is interested in new opportunities in 'Libya which plans to increase natural gas production over the next five year. Libya's National Oil Corporation, which is run by the state, announced a new oil find in Sirte Basin in 2025 through OMV. (Reporting and editing by Chris Reese, Cynthia Osterman and Stephanie Kelly)
Prices of oil plunge by 11% after US-Iran talks on resolving hostilities in Middle East
Oil prices fell by about 11% Monday, after U.S. president Donald Trump announced he would delay?any military attacks against Iranian power stations for five days. He also cited constructive discussions to resolve hostilities throughout the Middle East. This was just hours before a deadline which threatened to escalate a four-week old?war.
Brent futures dropped $12.25 or 10.9% to $99.94 per barrel. U.S. West Texas Intermediate fell $10.10 or 10.3% to $88.13 per barrel. Brent crude oil closed Friday at its highest price since July 2022. The volatility of both benchmarks for the 30-day futures contract has increased to the highest level since April 2022.
U.S. futures for gasoline and diesel also fell by about 10% on Monday, after reaching their highest level since 2022 last Friday.
Trump said that the United States had held talks with Iran in the last day, and both sides reached "major agreements." He added that a settlement could be made soon to end the war.
Crude futures fell by almost 15% in the first session but recovered some of their losses when Iran denied having engaged in any negotiations with the U.S. and said that it had launched new attacks against Israel and other Middle Eastern sites.
Iran's Revolutionary Guards have said that they will attack Israel's nuclear power plants as well as those supplying U.S. base across the Gulf if Trump's threats to "obliterate Iran's energy network" are followed through by the United States.
The war in the Gulf has damaged major energy infrastructure and stopped shipping through the Strait of Hormuz. This waterway handles around 20% of the global oil and LNG flows. On Monday, two?tankers bound to India passed through the Strait of Hormuz carrying liquefied gas that was loaded in Kuwait and the United Arab Emirates. However, overall traffic through the critical waterway remains blocked.
Analysts estimate a loss of 7 to 10 million barrels of oil per day in the Middle East. Fatih Birol said that the crisis in the Middle East was worse than both oil shocks from the 1970s combined.
A temporary lifting of U.S. restrictions on Russian and Iranian crude oil at sea has been made possible by the supply crisis. Indian refiners are planning to resume purchasing Iranian oil, while refiners in other parts of Asia are also considering the move. U.S. Energy Sec. Chris Wright said on CNBC that it is "highly likely" that the United States will release more oil from their Strategic Petroleum Reserve in order to 'calm the energy markets during war with Iran.
Around the world, in Russia, the Baltic Sea Port of Ust-Luga has resumed oil-loading after an alert for drone attacks was lifted. Primorsk, which is located nearby, remained closed after air strikes and added to global shortages. Federal Reserve Governor Stephen Miran stated on Monday in the U.S. that it was too early to predict the impact of the Iran war's energy price shock on inflation. He still believes rate cuts are warranted for the sake of the job market.
Interest rates are used by central banks, such as the Fed, to control inflation. Reduced interest rates can increase economic growth and oil demand. Bank of Japan is, however, preparing for changes to its policy in April. This will keep the possibility of an increase in interest rates near term alive, as the weak yen and Middle East war are putting inflationary pressures onto the economy. Market sources reported on Monday that the Japanese government was considering intervening in crude oil futures, as Middle East conflict is driving energy prices higher.
A European Commission survey revealed on Monday that consumer confidence in the Eurozone fell to its lowest point since late 2023. This is an early indication of the impact that the war with Iran, and rising energy prices, may have on a broader economy.
The global air travel industry is still severely affected by the Iran War, which has forced the closures of major Middle Eastern hubs such as Dubai, Doha, and Abu Dhabi. This has left tens thousands of passengers stranded. Reporting by Scott DiSavino, Seher Dareen, Mohi Nairayan, and Florence Tan, in New York; Additional reporting, Dmitry Zhdannikov, and editing by David Goodman.
(source: Reuters)