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Back to the 70s? Investors prepare for the return of stagflation
Investors now seriously consider the possibility that a war in the Middle East may create a stagflationary shock, as it did fifty years ago when disruptions to global energy supply sent inflation soaring and harmed growth. Kaspar Hense is the portfolio manager of RBC BlueBay Asset Management. If oil prices continue to rise, the safe-haven status for government bonds, and all other assets, is at risk. Five charts show how stagflation could affect the markets. OIL IS THE KEY Oil prices are at the forefront of the stagflation debate, and now the question is: how long can they continue to rise? Brent crude soared over $100 per barrel on Monday, and is on course for its largest daily increase since the COVID crises of 2020. The price of European wholesale gas has risen by 70% since the beginning of the year. This is bad news for inflation. Capital Economics stated that "a useful rule of thumb" is that an increase in oil prices by?5% adds about 0.1 percentage point to inflation on developed markets. High oil prices could also dampen the economic growth. According to the International Monetary Fund, for every 10% increase in oil prices that persists, there will be a 0.1-0.2% drop in global economic production. The oil price spikes that occurred in 1973, 1980 1990 and 2008 contributed to the U.S. recessions. DILEMMA OF THE CENTRAL BANK Central banks are in a difficult position, since rate increases to curb inflation could undermine the economic growth. Chicago Fed President Austin Goolsbee said to the Wall Street Journal that a "stagflationary climate as uncomfortable as any could be looming" on Friday. The markets now expect at least one hike by the European Central Bank this year. Before World War II, there was a 40% probability of a reduction. The Bank of England is also expected to raise rates this year, after previously pricing at least two rate cuts. Rainer Guntermann, a Commerzbank rates'strategist, said that he believes only a decline in oil prices can reverse the rate hike fears even though dovish minds at the ECB are also pointing out downside growth risks. THE MISSING LINKERS Investors have fled fixed-income assets where inflation will erode future returns. Short-term bonds are most sensitive. The yields on two-year gilts in Britain have risen by 50 basis points over the past week. This is the biggest increase since the UK budget crisis in 2022. German and Australian yields on two-year bonds have increased by more than 30 basis points in this time period, while U.S. yields on two-year bonds are only up 13 basis points. Investors are now looking at inflation linked debt where the principal as well as the interest rate is tied to inflation. The British five-year breakeven rates, the difference between inflation linked and nominal yields, have risen by 28 basis points since February. On Monday they reached almost 3.5% - their highest level since April last year. In the meantime, five-year inflation linked Treasury yields rose by 4.2 basis points in the past week, compared to a rise of 15 basis points in nominal yields. Eyes on the US If you are wondering if the economic and market hit on the U.S. will force Donald Trump to alter his course, remember that the stagflationary impact of the war is likely to hurt the U.S. much less than Europe or Asia. Michael Every, senior global strategist at Rabobank, said in a recent note that the U.S. is self-sufficient with many of the commodities that are being choked directly or indirectly through the (Strait of Hormuz). He also mentions helium and fertiliser, both of which are important in the semiconductor industry. It is not surprising that the U.S. market has performed better relative to other markets. The S&P 500 fell 2% last weekend compared to Europe's 5.5% drop and MSCI Asia Pacific ex Japan index's?6.3% decline. U.S. Bonds also outperformed German bonds last week. The U.S. was already looking vulnerable to stagflation before the recent spike in energy prices. The economy lost jobs unexpectedly in February. Data this week will likely show an increase in U.S. Inflation. Where to hide? Investors dislike stagflation, because it damages stocks, bonds, and gold, which does not offer a yield. Analysts said that the precious metal fell?2% in value last week and again on Monday. Since the beginning of the war, the dollar has gained more than any other currency in the developed markets. Kit Juckes is the head of FX Strategy at Societe Generale. He said that "the U.S. can withstand a shock to oil prices, but there will be some political consequences." The same is not true for Europe and the UK, in particular.
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In coordinated raids in northeast Nigeria, 15 militants islamists are killed
Military sources and residents reported that Islamist militants had killed 12?soldiers? and three civilians during coordinated overnight attacks in northeast Nigeria. Aid groups report that despite major military operations, the '17-year' islamist insurgency has resulted in thousands of deaths and 2 million displaced people in the region. The attacks in Kukawa and Dalwa followed a similar assault on an 'army post' in Ngoshe, and demonstrated the ability of militant groups to strike a?multiple-front at once. Boko Haram fighters and Islamic State West Africa Province(ISWAP) fighters invaded Kukawa District in Borno State before dawn on Sunday, pushing toward the nearby military camp?in a 3-hour battle. A military source confirmed that troops retook camp, but not before killing the commanding officer as well as five other soldiers. Karta Ma'aji lawan, a Kukawa-based legislator, confirmed that the officer was killed and the attack. Shetima Isa, a resident and traditional leader in Dalwa said that militants had killed two soldiers, three residents and set more than 250 homes ablaze. Another soldier said that insurgents attacked the Goniri base in Yobe State, killing four soldiers, and setting buildings and vehicles on fire. The?Nigerian Army didn't respond to a comment request. Nigeria's military increased 'raids' on insurgent hiding places this year, as part of a renewed offensive. However, ISWAP, Boko Haram and other terrorist groups continue to take advantage of the difficult terrain, porous borders, and thin state presence across the northeast. The latest attacks occurred just hours after military analysts had warned that an ISWAP attack was likely. (Reporting and writing by Ahmed Kingimi, Elisha Gbogbo and Andrew Cawthorne).
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UN envoy: Israel will take action against anyone who promotes radical ideas that are in opposition to it.
Danny 'Danon, Israel's U.N. Ambassador, said that Mojtaba?Khamenei has the same radical ideas in the past and Israel will â€target†anyone who promotes radical adversities against it. Danon, a reporter at the United Nations, said that changing the leader of the country does not change the system. He was asked about Iran's decision to name Khamenei as the successor of his father Ali Khamenei who died on the first day the U.S. and Israel began their war against Iran last month. Danon stated that "the new leader is unfortunately more of the same ideologies, the same radical views, and... we will find anyone who promotes these 'radical ideas' against us. Danon said that the Iranian people should choose their own leader, adding: "We have to create conditions for them and we are doing this now." Danon responded that Israel and the U.S. are hunting Iran's missiles and "degrading" its capabilities. "So, it will be harder for them to attack civilians in Dubai or vessels in the Strait of Hormuz. It's not 100% certain, but they will find it harder to do so. "So, I'm optimistic." Danon said that the number of attacks is decreasing every day. The war has effectively closed the Strait of Hormuz where a fifth of world oil and LNG is shipped along Iran’s coast. (Reporting and editing by David Brunnstrom, David Ljunggren, and Mark Porter).
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Trump considers options to reduce energy prices amid Iran's strikes on markets
According to two sources familiar with the situation, U.S. president Donald Trump will review a range of options as soon as Monday to help tame the oil price, which has risen to over $100 per barrel because of the Iran War. The White House is concerned that the rise in oil prices could hurt U.S. consumers and businesses ahead of November's midterm elections, when Trump's Republican allies hope to keep control of Congress. The sources say that U.S. officials have been in Washington discussing with counterparts of the Group of Seven major countries a potential joint release of crude from strategic reserves. Sources who spoke on condition of anonymity said that other options include restricting U.S. imports, intervening on oil futures markets and waiving federal taxes. They also suggested lifting the Jones Act, which requires domestic fuel to only be transported on U.S. flagged ships. Analysts say that U.S. policies will have little influence on global oil markets, as long as fighting prevents Middle East oil exports through the Strait of Hormuz. Middle East oil accounts for about a fifth of the global supply. The White House is in constant contact with relevant agencies to discuss this issue. It's a priority for the president. "The White House?is in constant coordination with the relevant agencies on this important issue, as it is a top priority to the?president," White House spokesperson Taylor Rogers stated. Since the U.S.-Israeli strikes started on February 28, global crude oil prices are at levels they have not been seen since mid-2022. They briefly reached $119 per barrel. Gasoline and other fuels costs have also risen. The White House asked federal agencies last week to put together proposals that would help reduce pressure on gasoline and crude oil prices. This was reported previously. Sources said that top White House officials are involved in the discussions, including White House Chief of Staff Susie Wiles, and Stephen Miller. Analysts and officials in the oil industry have stated that the White House does not have the tools to curb the rising prices of oil unless it can restore the flow of oil tankers through Strait of Hormuz. This narrow waterway connects Iran and Oman and carries about a fifth of world oil. One of the sources who works with the White House said, "The options are marginal to symbolic and even 'deeply unwise.'" The energy market turmoil comes at a delicate time for the president, who has been trying to keep fuel prices low to send a strong economic message to voters. The rise in fuel and oil prices could have a ripple effect on the economy and increase consumer and transportation costs. The White House's plan to provide backstop insurance and naval escorts for tankers travelling the Strait of Hormuz has so far failed to increase shipping through this vital waterway. (Reporting and editing by Will Dunham; Jarrett Renshaw)
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UAE's UN envoy urges US-Israeli war against Iran to be de-escalated
The United Arab Emirates Ambassador to the United Nations at 'Geneva' called for a deescalation in the israeli-U.S. war against 'Iran on Monday and a return to negotiating. Since the beginning of the war on February 28, oil prices have risen as major producers have cut back on supplies. Stock markets have also plummeted. Iran has fired at Gulf states that host U.S. bases, disrupting travel and business. "De-escalation, de-escalation, de-escalation. "This is our position and we will continue to offer it," Jamal Jama al Musharakh, Ambassador in Geneva told reporters. Since the beginning of the war, Iran has targeted six Gulf States with drones and missiles. The ambassador stated that there have been over 1,400 attacks against the UAE in the last few days, which resulted in the deaths of four civilians as well as 114 other injuries. The envoy expressed concern over the targeting of UAE civil infrastructure by Iran, including "desalination facilities and energy facilities". He added, "We're also prepared to protect these important locations." He said that despite the fact that his country was being attacked in an "unwarranted way", UAE bases would not be used to attack Iran. U.S. officials say Washington's main goal is to destroy Iran's nuclear and missile programme. Donald Trump stated on Saturday that he is not interested in negotiations with Tehran. He also suggested that the war will end when Iran's military and leadership are no longer in place. (Reporting and editing by Timothy Heritage, Olivia Le Poidevin)
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Japan: IEA requested emergency oil stocks to be released at G7 Meeting, says
During a 'online meeting' with the Group of Seven Finance Ministers, Satsuki Katayama, Japanese Finance minister told a press briefing that IEA called for a coordinated release?of emergency?oil reserve during a?online meeting on Monday. Katayama stated that the IEA had asked each country to release oil reserves in a coordinated manner. "In response to current conditions... the G7 has agreed to closely monitor developments on the energy?market, and to take the necessary measures to support the global energy supply. This includes releasing oil reserves." Katayama stated that the IEA and the Ministers were joined by executives from the World Bank, the International Monetary Fund and the Organisation for Economic Cooperation and Development. Katayama said that the G7 would hold a meeting of energy ministers to discuss next steps. On Monday, oil prices reached levels not seen since the mid-2022 period as major producers cut their supplies. Fears of a prolonged shipping disruption also gripped the market due to the U.S.-Israeli conflict with Iran. Japan is one of the world's biggest oil reserves, as it depends on Middle East oil for approximately?95%.
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Edison Utility wins shareholder lawsuit against LA wildfires
Southern California Edison's parent company won the dismissal of a lawsuit alleging that it defrauded its shareholders before?the wildfires in January 2025, by claiming to have significantly reduced losses due to such disasters. Edison International was accused by shareholders of being "structurally incapable" to deal with extreme weather and implement the Public Safety Power Shutoff Program, which is a last resort measure?to safely shut down powerlines when fire risks become too high. Shareholders also claimed that Edison falsely stated the program could, along with hardening of power lines and trimming vegetation reduce?wildfire risks by up to 90%. Edison's stock price dropped by around one-third in one month after the wildfires. In a ruling on Friday, U.S. district judge Otis Wright of?Los Angeles ruled that Edison's'statements' about its power shutdown program were too vague for shareholders to rely upon, and Edison had not shown that it promised to reduce the risk of wildfires everywhere it served. Wright wrote: "If anything the PSPS statements - read with a charitable eye for plaintiffs - clearly indicate that PSPS wasn't perfect." It would be unreasonable for a reasonable investor to assume SCE can use PSPS across all 38 transmission lines if there is no claim of 'perfect or complete loss reduction through PSPS. The judge said that shareholders can re-file their claims for risk reduction. The lawyers?for shareholders?didn't immediately respond to comments on Monday. Edison, located in Rosemead California, and its attorneys?didn't immediately respond to similar inquiries. The wildfires of January 2025 'killed 31 and destroyed or damaged over 16,000 structures. The U.S. Government sued Southern California Edison in September for causing the Eaton Fire to start and destroying National Forest System land.
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Dolphins release Tua Tagovailoa as QB, and assume record dead cap hit
The Miami Dolphins has said goodbye to quarterback TuaTagovailoa. The Dolphins released the former first round draft pick on Monday, according to reports. They confirmed this with a highlight video of a minute length posted on social media, with the caption "Thanks for the memories, Tua." The team has also released a statement. General manager Jon-Eric Sullivan stated in a statement that he had informed Tua's representation of the fact that the team would be moving in a different direction with the quarterback position. He will release Tua after the start of the new season. "As Tua and I both know, I hold great respect for him as a person and a player. "On behalf of the Miami Dolphins I expressed our thanks for his many contributions both on the field as well as in the community during his six years in Miami." The move is primarily for accounting reasons. He will be released on Wednesday when the new season begins. It will cost the Dolphins. Miami is liable for dead money of $99.2 millions, which is a record in the NFL. The dead money may be split over two seasons. The new Dolphins brain trust -- General Manager Sullivan and Head Coach Jeff Hafley -- must now find a solution to their quarterback dilemma. Tagovailoa was drafted by the Dolphins with the No. The Dolphins drafted Tagovailoa with the No. Joe Burrow was taken by the Cincinnati Bengals with the No. Justin Herbert was selected ahead of him by the Los Angeles Chargers at No. 6. Tagovailoa, who led Miami to a 11-6 record in 2023 and threw for an NFL-best 4,624 yards, was named?to Pro Bowl. It was the only time in his career that he played every game. He had suffered multiple concussions, as well as other injuries including a hip injury. In July 2024 the Dolphins extended his contract for four years and $212,4 million dollars, which was to last until the 2028 season. In the last three games of last season, former head coach Mike McDaniel benched Ewers in favor of Quinn Ewers. Tagovailoa had led the Dolphins through the first 14 matches to a 6-8 mark and had a record of 15 interceptions compared to 20 touchdowns. The Dolphins are still unsure of their next move at quarterback. Spotrac reports that the Dolphins have two other QBs signed up for the 2026 campaign besides Tagovailoa. These are Ewers from Texas (a seventh-round draft pick) and Cam Miller from Las Vegas Raiders in the sixth round of the 2025 draft. Miller, a former quarterback from North Dakota State University, was selected in January by the Dolphins as a member of the Raiders practice squad. Zach Wilson, the former No. Zach Wilson, the former No. The Dolphins have the 11th overall pick in the draft next month. The Dolphins will have the No. Kirk Cousins and Geno Smith will also be released on Wednesday by their respective teams if they want to find an experienced free agent quarterback. In a team statement, Sullivan stated that "as we'move forward' we will focus on infusing a competitive spirit across the roster and establishing a solid foundation for this team in order to build a team that is a sustainable winner." Tagovailoa finished his career with Miami with 18,166 yards of passing, 120 touchdowns and 59 interceptions, as well as a completion rate of 68% in 78 games. As a starter, he had a 44-32-record. He also ran 473 yards for six touchdowns. Field Level Media
RPT-Ukraine Bets on US LNG as Gas Import Needs Rise
The state gas company of Ukraine said that it may import large quantities of U.S. natural gas via terminals located in Germany, Greece and Poland this year, as Kyiv continues to struggle with the effects of Russian attacks against its infrastructure.
The White House is leading the talks to end more than three long years of war following Russia's invasion in Ukraine. Kyiv announced on Tuesday that it would accept a ceasefire offer, but Moscow is yet to accept one.
The importation of U.S. natural gas to Ukraine could strengthen the economic relationship between Washington and Ukraine, while the presence of U.S.-produced gas in Ukraine’s storage facilities may deter Russian aggression.
Dmytro Lyppa told an interview that Ukraine could import as much as 4 billion cubic meters of gas from April to October.
Calculations based on average gas prices find that the total import bill would be at minimum $1 billion.
Lyppa stated that up to 50% of the LNG imported through Europe would come from LNG terminals in Europe rather than pipeline gas.
In an interview published on Wednesday, Lyppa stated that "if we look at the political aspect of it, it's better for us to get as much (U.S. Liquefied Natural Gas) to Poland as possible and bring it gradually to us."
Lyppa stated that the geopolitical environment meant U.S. LNG would be preferable to rival Qatari LNG if only the price difference wasn't significant.
RUSSIAN TRANSIT IS NOW OVER
The Ukraine was the main transit route for Russian Gas until the start of this year when the transit agreement between the two countries expired. This deprived Russia of revenue from transit fees.
Ukraine has also large underground storage facilities for gas. President Volodymyr Zelenskiy stated that Kyiv, the White House and other countries have discussed the possibility of using these sites to store U.S. Liquefied Natural Gas (LNG) which could be used in place of some western European gas upon which Ukraine is dependent.
In recent weeks, Russian forces intensified their attacks on Ukrainian infrastructure (production and underground storage facilities), reducing Ukraine’s gas production. They also limited its ability to remove fuel stored in storage.
Ukraine produced 52-53 millions cubic metres of natural gas per day prior to the recent attacks. However, a senior source in the industry said that the attacks had reduced production by as much as 40%, forcing Kyiv into increasing imports. Officials have refused to provide updated numbers, but some output has been restored.
As temperatures begin to rise and gas consumption starts to decrease, Ukraine will typically start pumping gas in storage for winter 2025-26 when the current peak heating season ends. This is usually around April.
According to energy officials, Ukraine must have 13 bcm in reserves by mid-October to ensure a smooth winter.
Lyppa stated that LNG can be delivered to Ukraine via terminals located in Germany, Greece and Lithuania.
Although the Polish and Lithuanian routes are the cheapest, Lyppa says Ukraine will also need to use other pipes as the Polish interconnector only allows imports of up to 7 millions cubic metres per day compared to a demand of 20-25. The exchange rate is $1 = 0.9158 euro. (Reporting and editing by Barbara Lewis.
(source: Reuters)