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Asia stocks drop as yen soars and Iran warns the US of retaliation
Asian stocks fell on Tuesday as a result of a surge in the yen, mixed economic data and fresh Iranian threats?in the Gulf. Meanwhile, commodity prices and Treasury bond yields rose due to the new Iranian threats?in the Gulf. The yen rose as much as 1% to 152.89 - its highest level since February 18 - as investors unwound $2.35 trillion of carry trades funded by yen. The yen is at its highest level since February. This was driven by the sharp unwinding of carry-trade and short-yen positions, as investors priced in a faster Bank of Japan tightening, said Joel Kruger. The Japanese government's willingness to intervene in the market and support the currency by remitting capital has given the movement a boost. After a U.S. holiday on Monday, the S&P 500 emini futures fell 0.3% as well. MSCI's broadest Asia-Pacific index outside Japan fell 0.5%, led by a regional decline of 1% in Australian shares following a sharp fall in local consumer sentiment in September. Brent crude futures rose 1.4% to $98,34 per barrel in Asia after Iran threatened retaliation against the U.S. on Tuesday with "economic war" and claimed it fired an 'advanced rocket at U.S. Warships. Westpac analysts stated that "while U.S. Labor Day was a quieter start for trading volume, the weekend's tit for tat strikes between the U.S.A. and Iran continued to exert upward pressure on oil, acting as a lag on risk sentiment in general." GROWTH PROSPECTS The markets also digested other economic data released Tuesday. Data from China showed that exports grew faster in August due to a strong demand for high-tech products and AI. In a recent research note, ING analysts noted that while the geographical picture appears to be lopsided as the U.S. recession recedes, demand in other markets remains strong. Revised data shows that Japan's economy grew faster in the April-June period than originally estimated, but still fell short of analysts' expectations. After the data was released, Japanese government bonds surged. The yield on the 10-year bond fell 4.5 basis points, to 2.885%. This gave further momentum to the rebound of the yen, just weeks after it had hit a four decade low, and triggered an unusual joint intervention from authorities in Tokyo and Washington. Data showed that the?real wage in Japan rose by 2.4% from a year ago to?July, which is the largest increase since May 2021. Capital Economics analysts in a report said that wage growth is increasing and the Bank of Japan should accelerate the pace of tightening. The yield on the 10-year Treasury bond in the United States was up 1.6 basis points to 4.798%. This is a continuation of its rise after a two day retracement. According to the CME Group's FedWatch, traders are still pricing in an implied 60% chance of a hike of 25 basis points at the Federal Reserve’s next two-day meeting that ends on September 16. This is about the same as it was a week ago. The dollar index (which measures the strength of the greenback against a basket six currencies) was trading at a level of 98.83, a low for two weeks. Copper prices reached a record high of $14,97 per metric ton, as concerns about supply grew. Gold remained steady at $4404.29. Bitcoin fell 1%, to $78,458.04 while Ether was down 1.1%, at $2,468.37.
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China's August imports of iron ore exceeded expectations as typhoons delayed July customs clearance
China's iron ore imports rose by 0.4% in August compared to a month ago, defying analyst's expectations of a drop, after multiple typhoons hit ports and delayed clearance. Data from the General Administration of Customs revealed on Tuesday that the world's biggest iron ore consumer imported 108.54 metric tons of this key ingredient for steelmaking last month. This is a 3.1% increase from the previous year. Four analysts predicted August ore imports between 107 and 108 millions tons before the release of data. Steven?Yu is a senior analyst with Mysteel. The monthly increase in ore imports could be due to the fact that some cargoes arrived in July but only cleared customs last month. Yu explained that our earlier forecast predicted July imports to be higher than a month ago, but instead it showed a decline. As part of a new El Nino weather pattern, China has experienced frequent and intense typhoons in the last two months. The typhoons had a negative impact on August's shipments, but the higher shipments made up for it. Data from the shipping tracker Kpler revealed that global iron ore shipments into China increased 6.6% in August compared to a month ago. According to Mysteel data, the ore demand was lower last month. The average daily hot metal production fell by 0.7% from one month to another. Iron ore imports in the first eight-month period of this year totaled 845.27 millions tons, an increase of 5.5% over a year ago. RESILIENT?STEEL EXPORTS Analysts said that China's steel exports in August were resilient as export prices remained low and overseas demand remained steady. The August steel exports rose 6.8% and 0.4% respectively compared to the previous month. They reached 10.16 million tonnes, a record high for a 4th consecutive month. Kexin Bai is an analyst with Shanghai Metals Market. She said that the price competitiveness of Chinese Steel appealed to some emerging markets which are price sensitive. Also, shipments to Africa and South America grew as Middle East tensions disrupted the shipping flow via the Persian Gulf. The total steel exports between January and August fell 3% compared to a year ago, to 75.15 millions tons.
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Industry executives say that global diesel supply will remain tight throughout the winter.
Senior industry executives stated on Tuesday that the global diesel supply would remain tight because of a 'lack of spare refinery capacity', Russia’s export ban and the approaching peak winter demand. The wars in Ukraine, Iran and Russia have affected refineries in Russia, the Middle East and Europe, driving diesel margins up to record levels. Crude supplies to Asia are also reduced. Russell Hardy, Vitol's CEO, said at the APPEC Conference on Tuesday that there was a real shortage of products. We are missing 2,000,000 barrels a DAY from Russia and we're also missing nearly 2,000,000 barrels a DAY from the Middle East. Hardy stated that crude oil is better positioned to supply than products, as the Middle East exports about 9 million barrels per day of crude oil and 1 million barrels per day of products. He said, "We don't have enough refinery capacity to stop these draws." "We're at the bottom of the stockpiles and are consuming the global surplus." Mark Senn said that most U.S. refineries are already at capacity. When you look forward to an upcoming winter season where diesel stock is quite deficient, you are setting up a situation where this strength could continue on those markets," added he. The U.S. Diesel prices reached record highs last week. Meanwhile, the crack spread of the product, which is a measure for refining profitability surged on Wednesday to a "record intraday" high of $108.02 per barrel. Hardy, from Vitol, said that high oil prices and a lack of fuel supplies will reduce the global demand for oil by 1.5 million bpd compared to 2025. He said that the gap between China’s crude imports for 2025 and 2026 is unsustainable at 5 to 6 million bpd and he expects it to close?by the end of this year, so China has enough fuel to get through winter.
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As fears of a prolonged Mideast conflict increase, oil prices rise
The oil prices continued to rise on Tuesday as the risks of a long-term conflict in the Middle East increased after Iran threatened retaliation against any new U.S. attack on its assets. This heightened concerns over disruptions to supply. Brent crude futures rose 49 cents or 0.5% to $97.49 per barrel at 0400 GMT. U.S. West Texas Intermediate Crude was $92.92 per barrel, up $1.44 or 1.6%. According to Suvro Sarkar, DBS Bank's head of energy analysis, WTI is playing catch up with Brent after the Labor Day holiday on Monday. Brent had absorbed the weekend's increase a day before. He said that the increase in hostilities between Iran and the U.S. could materially alter the markets' perception of oil-related risks, not just for 2026 but also well into 2027. Iran has threatened the U.S., saying it will wage "economic war" on the country and that it fired a?missile advanced at U.S. Warships. This highlights the danger of a larger escalation after both sides have exchanged new strikes. According to the U.S. Central Command, U.S. forces struck three Iranian oil tanks on Saturday, including one near Kharg Island - Iran's main oil export center. These attacks follow on from the Iranian Revolutionary Guards' strikes against U.S. warships in the area. The recent escalation in the Middle East conflict increased the likelihood of an?extended standoff punctuated with a calibrated military response by the U.S. Daniel Hynes, a ANZ analyst, wrote in a report that the Persian Gulf could remain constrained until 2026. We don't anticipate a return to the pre-war level of throughput until late Q1 2027 or early Q2 2027. The shipping traffic through the Strait of Hormuz slowed down at the beginning of this week after Iran warned on Monday that it would retaliate against any new U.S. strikes. Goldman Sachs has also raised their Brent and WTI price forecasts for December 2026 by $5, to $85 and $85, respectively. For 2027 they have increased them to $80 to $75, reflecting the new assumption that Middle East ship disruptions will continue into 2027. Ed Meir, an analyst at financial services platform Marex, said in its September commodity outlook that crude oil prices would likely stay high through the end of the year as long as "the war" continues.
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Australia prepares for its own fire seasons after European summer's heat
Australian firefighters are on alert after a destructive fire season in Europe. Australia has already experienced a'strong El Nino' weather event, which is characterized by hotter and drier conditions, as well as an increased risk of fires. Trent Curtin is the head of New South Wales Rural Fire Service (the world's largest volunteer firefighting service). Europe's fastest warming continent has experienced a scorching summer, which left the vegetation tinder dry and fueled severe wildfires. Italy's summer was the warmest in 75 years, while Britain's was the hottest since records began. Curtin stated that "we're experiencing some unusual conditions in the Northern Hemisphere right now." "They are experiencing fires they haven't experienced in a few decades, or maybe never before." Australia has a history of battling wildfires. The Black Summer fires of 2019 and 2020 destroyed an area as large as Turkey, killing 33 people. Authorities often conduct controlled burns to reduce the risk of wildfires. "This year, we are alert but not alarmed. "We're aware that the seasonal outlook expects a more active fire season than usual - conditions will also be hot and dry," said Alex Capararo. He was leading a hazard-reduction burn about three hours north of Sydney. According to the Bureau of Meteorology, the peak 'fire danger season' usually begins?mid-October in the northern parts of New South Wales and in December in the southern areas.
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Bankers claim that India's Reliance is planning to sell its first local debt after three years, raising $1.32 billion.
Five merchant bankers said that Mukesh Ambani’s Reliance Industries was'set' to return to India’s rupee bond markets 'after nearly three years'. This would be the 'largest single tranche fundraising' by a rated company since November 2023. According to bankers, the oil-to-telecom company plans to raise $1.22 billion through the sale of five year notes with an annual coupon rate of 7.47%. It will 'invite investors to bid in the week of September 18th, according to?bankers. This would be RIL’s first rupee-denominated bond issue since November 2023 when it raised 200 billion rupees, the largest local currency debt sale ever by an Indian non-financial firm. The bankers asked for anonymity because they were not 'authorized to speak with the media.' Meanwhile, the company didn’t immediately respond to an email asking for comment after normal business hours. Bankers said that a sharp drop in the yields of up to five-year local bonds has made this funding cheaper than selling dollar debt. Since the beginning of June, the?five-year bond yield has fallen 33 basis points. This is mainly due to the massive?dollar flows under the central banks' subsidised schemes. The flow of funds led by the non-resident dollar scheme lowered local yields while US Treasury rates increased the cost of funding in dollars for Indian borrowers. The bankers said that large?private banks will act as the arrangers of this deal and also?partly subcribe to these bonds. The company is also mulling over a 10-year issue of bonds and has been in talks with investors and bankers.
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As US envoys depart, Russian missiles strike Kyiv
Vitali Klitschko, the mayor of Kyiv, said that Russia resumed its airstrikes early Tuesday morning, shortly after the departure from the United States peace negotiators. The city was attacked with ballistic missiles, and six people were injured. Klitschko, who is a Russian-born boxer, said that after a series of what he called "ballistic missile"?strikes, people were trapped in a residential area and fires were raging across Kyiv. Separately, the Kyiv Military Administration announced on Telegram that a five-storey building and a residential block of three stories were damaged by falling debris. They asked people to seek shelter. According to its armed forces, as explosions rang out in Kyiv and neighbouring Poland, NATO and European Union members began military aviation operations on X. After U.S. peace representatives Jared Kushner, Steve Witkoff and Volodymyr Zelenskiy left after a meeting on Sunday with the Ukrainian president Volodymyrzelenskiy, Russia resumed their attacks as the Trump administration redoubled its efforts to end Russia's four-and-a half year war in Ukraine. After their return from Moscow, the Kremlin stated that it had not ruled out a resumption of the three-way talks. According to the regional governor, drones from Ukraine damaged civil infrastructure in Saratov on the Volga River, 730 kilometers (450 miles?) southeast of Moscow. This area contains a large oil refinery operated by the state-owned Rosneft as well as a number of industrial and military installations.
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Why isn't the price of oil higher than $100 despite disruptions in supply?
Brent crude, the global benchmark for oil prices, has risen this month. However it has remained below $100 per barrel despite the recent escalation of the U.S. - Iran conflict which has caused disruptions in Gulf exports via the Strait of Hormuz or the Red Sea. According to Argus, Crude Oil?shipments are now at 11 million barrels a day (bpd), down from 18 million bpd prior to the Iran War seven months ago. What are the factors that influence oil prices? SIGNIFICANT VOLUMES CAN FLOW?THROUGH HORMIZ Claudio Galimberti, Rystad's Chief Economical Officer, stated that in the week prior to fighting breaking out again on August 30th, roughly 8-9 million bpd was flowing through Hormuz. This is double what it had been the week before. The daily moving average, while it has fallen below 2 million barrels per day (bpd), is still between 4 and 5 million barrels. This puts Brent at $95, which Galimberti deemed a "fair price". According to industry estimates, daily exports range between 6 and 8 million barrels. Kpler data on Monday showed that there hasn't been a very large crude ship visible leaving the strait for at least two months. During the interim U.S. - Iran peace deal of?July?, Hormuz exported reached pre-war levels at 16 million bpd. The Gulf Exporters are using Alternative Routes and Means Gulf producers are expected to continue shipping cargoes outside of Hormuz for ship-to -ship transfers, thus reducing some of the initial shortfall. Saudi Aramco has resumed loadings at its Ras Tanura Port in the Gulf, but its exports to the Red Sea from Yanbu remain under pressure due to a naval blocade by Iran-aligned?Yemeni Houthis. Yanbu exports fell to 1.429m bpd, a six-month record low, in August. This was down from 3.9m bpd on average in the three previous months. Exports of Sidi Kerir, Egypt's alternative port, reached 2.139 million?bpd during August, a volume more than double that of June. Iraq, the No.2 OPEC producer, saw its exports rebound in August to around 2.34 million bpd. Exports from No. Kpler data shows that the United Arab Emirates shipped around 2.9 million bpd between August and July, after reaching a record high in June. Kuwaiti crude oil exports recovered to around 1 million bpd between July and August. The U.S. oil embargo has caused a sharp decline in Iran's oil production. Other Producers are Taking the Lead According to Jarand Rystad of Rystad energy, non-OPEC producers such as the U.S. Canada and Guyana will increase their combined output by 1.4 million bpd in this year. This will help to fill the gap. Kpler data revealed that Russian refineries have been unable to process crude oil due to the damage caused by Ukrainian attacks on their plants. Russia has, however, lowered its oil production forecast for 2026 to the lowest level in 17 years, which could reduce its exports. The importance of demand destruction is significant Rystad reported that the demand destruction of transportation fuels and petrochemicals in the third quarter was 3.5 million bpd compared to 4.5 million in the second. China accounted for more than 50% due to the increasing use of coal-based chemicals and transport electrification. China, the top importer, has been dubbed "the new demand OPEC" because of its influence on the market. Its seaborne crude shipments have dropped to?7m bpd between July and August from over 11m bpd back in February. The markets have also been comforted by the vast reserves of Beijing, estimated at 1,17 billion barrels by Kpler. PHYSICAL MARKERS TELL A DIFFERENT STORY Data showed that spot premiums had rebounded to levels seen in April, with Dubai and Oman $19-20 a barrel higher than Dubai quotes for cargoes loaded in November. Oman futures traded on Monday at $104.54 per barrel, while Dubai cash was at $105.10 per barrel. David Fyfe is the chief economist of Argus. "We have already seen prices that are substantially higher than $100 per barrel, and more importantly, the diesel market is in a state of severe shortage." Recent U.S.-Iran tensions are expected to reduce Gulf exports, while demand increases as refiners increase production of diesel fuel. Diesel prices have reached a record in the U.S. ANALYSTS CHANGE FORECASTS Morgan Stanley, for example, expects Brent prices to average $100 per barrel during the fourth quarter. Goldman Sachs has raised its Brent and West Texas Intermediate price forecasts for December 2026 by $5 per barrel, citing the expectation that Middle East ship disruptions will continue into next year. Goldman Sachs now expects Brent to be $85 per barrel and WTI to be $80 in December 2026. Prices for 2027 will then remain at $80 per barrel and $75 per barrel respectively.
Houthi attacks disrupt Saudi oil facilities, injuring 73, say authorities
Saudi authorities reported that operations at certain energy facilities in Saudi Arabia - the world's largest oil exporter - were halted Tuesday after a 'attack' by Yemen's Iran aligned 'Houthis' - which injured more than 70 people.
The Saudi energy ministry reported that fires broke out at the sites, and that several people were injured while emergency crews raced to the scene to assess the damage and contain the flames.
The ministry said that "the concerned authorities are addressing the consequences of the attacks."
"The necessary measures will be taken in order to ensure the safety of the workers and facilities, and to continue the work in accordance with the approved operational plans."
In an earlier statement, the Saudi-led coalition in Yemen stated that at least 73 people had been injured in Houthi attacks against southern cities Abha, Khamis Mushait Jazan and Najran.
The coalition vowed a firm response to the latest outbreaks of hostilities and said the latest escalation against the de facto OPEC head was "dangerous."
In a statement dated X, Colonel Turki Al-Malki stated that "the coalition will take the necessary?operational steps to deter and confront this terrorist militia's hostile approach".
Since declaring a naval blocade against Riyadh last July, the Houthis have launched attacks on Saudi Arabia, targeting their vessels in the Red Sea.
The Financial Times reported on Monday that Aramco Jazan oil installations were "hit by new strikes" and the damage was being assessed. ? Aramco did not comment on the report.
(source: Reuters)