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The world markets are on a tightrope, balancing between AI stocks and oil price shocks
Investors said that the turmoil on the world markets over the past week showed the economic outlook was 'now on a razor edge. There are equal odds for an AI boom to lift growth, or for oil shocks resulting from the U.S. - Iran war to send stocks and bonds into a tailspin. Global equities reached an all-time high on June 3 and then suffered their worst day in October the next day. This week, they have spent a lot of time reversing direction constantly to match U.S. president Donald Trump's volatile remarks about Iran as well as rapidly changing bets regarding when the Strait of Hormuz might reopen. Florian Ielpo, head of multi-asset and macro portfolio management at Lombard Odier Investment Managers, said that most investors had been assuming that the Strait of Hormuz would reopen in less than three months. He added: "If we were to expect oil prices at $95 for several months in the future, it would represent a radical change of outlook and a stagflation scenario." The market is treading a thin line. All Together In recent months, as interest rate and inflation markets have correlated with tech investment and oil outlook, assets that were not clearly linked have moved in tandem. AI-driven optimism is boosting Wall Street stocks, U.S. household assets, official growth forecasts for the next few years, driving breakneck expansion in Asia exporters, and lifting sentiment across asset classes, from global bank shares, to Greek debt. Taiwan is expecting the highest economic growth for 2026, thanks to "blockbuster semiconductor exports", while global tech spending sent imports and exported in China, which is the world's largest consumer of commodities, surging. It's because of this that the FTSE 100, which includes energy producers and miner stocks, has stopped moving inversely compared to so-called growth stock in the tech sector and is now rising with them. THE FLIPSIDE Investors warned that these tech-driven correlations would also make it harder to hide in the event of fears about inflation and rate increases affecting AI spending driving world markets. Investors warned that after markets began pricing in 70% odds of an U.S. interest rate hike, South Korea's won fell to its lowest level in 17 years and the country's technology-heavy Kospi index plummeted almost 9% within hours. Alessia Bernardi, global director of macro-economics at Amundi's research arm, Europe's biggest asset manager, still favors equities and believes that the markets are not pricing in a long-term Hormuz shut down. She warned that "a repricing (interest rate policy) along with higher oil costs and shortages would mean stagflationary risk, and some countries have already entered a recessionary perspective." The energy supply crisis is already affecting economies like Germany and India that aren't closely linked to technology. BUY THE DIPP? Asset managers are used to geopolitical shocks that cause rapid changes in sentiment. For example, Trump's "Liberation Day" tariff blitz of April 2025 shook U.S. stock prices before retail investors piled on a spectacular recovery trade. Ben Jones, Invesco’s global head for research, said: "If you believe that the Strait will remain closed for an extended period and that demand destruction and inflation are likely to occur then it's time to position your portfolio for stagflation." He said: "History has shown us that geopolitical risk?will pass, and when they do you tend to see markets rally very quickly." After Trump's announcements of tariffs, Wall Street's S&P 500 index fell sharply and then made a rapid and fierce rebound. The equity and bond markets also experienced the biggest swings since the COVID-19 epidemic. HEDGING Michael Nizard said that he was boosting his derivatives to profit from the stock market volatility. Many other asset managers have stated that they are now purchasing more insurance products rather than more equity. Kevin Thozet, a member of the Carmignac Investment Committee, said that he increased his holdings in inflation-linked U.S. debt due to market expectations for U.S. consumers prices being complacent. He said that data centre construction would be capital-intensive and increase energy prices. Ielpo, a Lombard Odier employee, said that he hedged his market bets while holding on to stocks and cutting back on government debt. Government debt can act as a safe-haven but it also moves according to inflation forecasts. German Bund yields have reached their highest levels in 15 years, as the price of debt fell during the Iran War. Meanwhile, Japanese 10-year yields have also risen to the highest level they've seen for three decades. Bond market volatility has risen by 5% since the beginning of the war. The stock market volatility is about the same as its long-term average but 35% more than it was year-to date.
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FOREX Dollar eases as US inflation data keeps rate hike at bay
The dollar eased Wednesday, after data showed that U.S. consumer inflation reached its highest level in 3 years in May. Although the reading was in line economists' expectations. This lowered the odds of the Federal Reserve raising rates this year. In May, the U.S. consumer price index increased at the fastest pace in three years as the Middle East conflict pushed up the cost of gasoline and energy products. Bureau of Labor Statistics of the Labor Department announced on Wednesday that the Consumer Price Index had increased by 4.2% over the 12-month period ending in May. This is the biggest gain since April 20,23. The economists surveyed by predicted the CPI to increase 4.2% on an annual basis. Karl Schamotta is the chief market strategist at Corpay, in Toronto. He said that the Federal Reserve has not yet been able to use the soaring prices of energy as a factor for the Federal Reserve's core measures. The dollar index (which measures the U.S. currencies against six other currencies) was 0.2% lower, at 99.75. However, it remained near the two-months high of 100.214?touched Monday. Schamotta stated that traders are preparing for a neutral statement by officials at the meeting next week, and have modestly reduced expectations of a rate increase before year's end. Short-term traders of?U.S. Interest rates have shifted away from betting that the Federal Reserve would deliver a rate increase as early as September. However, traders remain confident that a hike will arrive in October. The U.S. and Israeli conflict with Iran also put traders on edge. Donald Trump, the U.S. president, said that Iran took too long to reach a deal. They would now have to "pay the price." Meanwhile, Tehran announced it would review its diplomatic relationship with Washington following overnight strikes. Dominic Bunning is the head of G10 strategy for FX at Nomura. The Yen remains in focus A Bank of Japan rate increase at its policy meeting on June 16 is almost fully priced, so it's unlikely to cause a significant turnaround in the?yen's weakness even if it happens. Tony Sycamore is a market analyst for IG. He said that it would take a hawkish comment from Governor Ueda to signal the BOJ to move its next hike forward from December to September – with the possibility of a 3rd hike before the end of the year. Without that or something like it, the Ministry of Finance may need to take out their cheque book once again in order to defend the currency. The Japanese yen?remained steady against the dollar at 160.34, and continued to hover around 160. This level is widely considered as a line drawn in the sand that will trigger official intervention. According to a poll of economists, the BOJ is likely to raise its key rate of interest this month, and then again in the fourth-quarter, bringing borrowing costs up to 1.25% at the end of the year. This is because it's more concerned about inflation than the downside risks to the economy. DOLLAR SOFTNESS The Canadian dollar gained 0.2% versus its U.S. equivalent after the Bank of Canada kept?its benchmark rate unchanged on Wednesday. Governor?Tiff MacKlem, however, reiterated that central bank officials would not hesitate to increase rates if necessary to control inflation. The pound was 0.3% stronger against the dollar Wednesday as investors closely watched the latest escalation of tensions between Iran and the U.S. ahead of the UK GDP data on Friday. The leading cryptocurrency, bitcoin, was almost flat on the day. It now stands at $62,069. (Reporting and editing by Kevin Buckland, Jan Harvey and Jan Harvey; Additional reporting and editing by Sophie Kiderlin and Satoshi Sugyama in London; Reporting by Saqib Ahmed Iqbal; Additional reporting and editing by Sophie Kiderlin and Satoshi Sugyama in Tokyo)
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ROI-Global trade in rude health? McGeever: Yes, with a catch
Global trade is not cooling in the shadow of tariffs and trade wars. It's heating. How durable is it when the price and not the volume is what's stoking up the flames? Recent trade data from the U.S., China and other major economies show that cross border commerce is growing at a faster rate than economists expected. In many cases the "increased activity" and the "surprisingly strong headline export numbers" were primarily driven by "higher prices". These reflect the spike in inflation caused by the Iran War, particularly on the oil and energy markets. This was especially true in the U.S. where exports reached a record of $327 billion last month, largely due to shipments of a wide range goods. In fact, the goods surplus shrank to the lowest level since 2020. This is good news for the U.S. economic system, since the declining deficit could contribute to the growth of the economy in the second quarter. This may be primarily due to the high prices of fuel, oil and other energy products. It is important to ask how long the improvements will last. It's not only the price that matters. Canada's physical export volumes are now back where they were prior to the U.S. Presidential election which returned Donald Trump to office in November 2024. This has triggered trade tensions with the United States. According to CIBC, the exports of April were only second to those in February last year when companies were preparing for Trump's looming duties. Base effects are another factor which may have a positive impact on headline trade figures. The slowdown in trade during the first half of the year as Trump's tariff wars began is now used to compare year-over-year figures. It is too early to predict a trade revival. CHIPS, CHIPS HORAY The price is also playing a major role in Asia's trade explosion, but the booming AI-related demand also fuels the sizzling numbers. China, the largest exporter in the world, saw its total exports rise 19.4% in May. Pantheon Macroeconomics says that sales of high-tech goods accounted for 12 percent. While the value of integrated-circuit exports has more than doubled in the last year, the export volume rose by only 2%. This suggests that the headline figure is inflated because the price was high. The same thing is happening in other sectors. However, Beijing policymakers and critics will continue to focus on headline dollar figures, particularly the large one, China's total 12-month rolling trade surplus of more than $1 trillion. Taiwan's AI export surge was even more impressive. Exports rose in May more than expected to the second highest level by value ever, up almost 52% compared to a year ago. Price was again a major factor. TSMC, the largest manufacturer of 'advanced chip technology used in AI applications', is based in Taiwan. It also supplies Nvidia and Apple, among other tech giants. Chips, computer equipment and software, as well as other high-tech products, have seen a surge in price over the last year, largely due to an explosion in demand. Goldman Sachs Global Institute estimates that AI-related investments will reach $7.6 trillion by 2031. SURPRISING RESILIENCE Global trade has shown remarkable resilience, which few observers could have imagined possible in the face of volatile market conditions. Trump's "Liberation Day tariffs" triggered a global trade war, which may have ended decades of internationalization. Geopolitical rifts also threaten trade flows, notably in Middle East. AI frenzy?can be credited with keeping global trade moving. The demand for these applications has accelerated, and much of the trade of AI-related products takes place across borders. The question is, can this continue? Could the rise in AI compute costs curb demand eventually? Could major powers seek to reduce AI supply chains in order to minimize national security risks? The AI boom is unlikely to fade away anytime soon, which suggests that trade activity could'remain resilient', even in the face of deglobalization, tariffs and protectionism. Everything seems to be dependent on the outcome of this tech story, just as it is with other parts of the global economic system. 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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IIR reports that the gasoline unit of Nigeria's biggest refinery will resume full rates by mid-June.
IIR Energy, a monitor of the oil industry in Nigeria, said that Dangote's refinery had derated its gasoline-making unit (RFCC), by 34%. The?unit is expected to resuming full fares around mid-June. The refinery didn't immediately respond to our request for comment. "Initially, the lighter crude that was being processed resulted?insufficient feed availability for the RFCCU. By the end of the month, IIR Energy confirmed that there was a problem with the RFCCU's flue gas sliding gate valve. IIR confirmed that the repair work is nearly complete on "that issue" in an email. Fuel prices are at record highs due to the war in the Middle East. Africa's biggest refinery was fully operational in early 2018. Its goal was to?transform Nigeria into a major supplier of?refined? products after decades of inadequate refinery capacities. According to Kpler's data, gasoline exports have fallen from 81,000 barrels per day last June, down to 17,000 barrels a day in May.
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Expected increase in US consumer prices for May
The Federal Reserve has more reasons to maintain interest rates at the same level until 2027, as U.S. consumer inflation grew at its fastest pace in three years during May. According to the Labor Department Bureau of Labor Statistics, on Wednesday, the Consumer Price Index rose 4.2% over the 12-month period ending in May. This is the biggest gain since April 20,23. In April, the CPI increased 3.8% on a year-on-year basis. Prices rose 0.5% monthly after a 0.6% increase in April. Economists surveyed by predicted?the CPI to increase 4.2% on an annual basis and gain 0.5% monthly. Inflation has been outpacing wage growth for the second consecutive month, which could weigh on overall economic growth. For the second straight month, inflation outpaced wage increases. This could have an impact on economic growth. The rising cost of living has become a political liability for Donald Trump and his Republican Party as they seek to maintain control of Congress during the November midterm elections. Trump's promise to reduce inflation was a major reason he won the presidential election of 2024. However, his approval ratings have fallen as frustration grows over his economic management. Core CPI, excluding volatile components such as food and energy, increased 2.9% on an annual basis in May. This was after a 2.8% increase in April. The so-called core CPI rose 0.2% monthly after increasing 0.4% in April. For its 2% target, the U.S. Central Bank tracks Personal Consumption Spending Price Indexes. All inflation measures are well above the Fed target. Data from the U.S. Energy Information Administration revealed that in May, the national average gasoline cost increased by?8.8% to $4.60 per gallon. Gasoline prices were at one time up by over 50% since the U.S. Israel and the United States attacked Iran in late February. In recent weeks, prices have fallen amid a ceasefire. This has led some economists to cautiously hope that May will be the CPI peak. This report came after news that the economy had posted a?month with above-expectations growth of jobs in May for a third consecutive?month. For the third month in a row, the?unemployment level remained at 4,3%. Although financial markets are pricing in an increase, economists continue to believe that the central bank has a high bar to raise interest rates. (Reporting and editing by Andrea Ricci, Chizu Nomiyama, and Lucia Mutikani)
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Sempra says Texas grid projects require over $7 billion investment after ERCOT backing
Sempra, an energy infrastructure company, announced?on Wednesday it had received approvals for a number of new transmission projects in Texas. These, along with earlier go-aheads are expected to cost over $7 billion. Last week, the Electric Reliability Council of Texas, the operator of?the electricity grid in Texas, approved the new projects. According to the U.S. Energy Information Administration (EIA), U.S. electricity demand reached'record levels' in 2025, and it is expected to continue to rise 'this year as tech companies rapidly build data centers that use as much electricity as an entire town at one site. Sempra’s latest projects include new lines along the I-35 and southern Dallas-Fort Worth corridors, along with a?upgrade approved in April. These are expected to support 16 gigawatts in new power demand. As they rush to meet the soaring demand of tech giants, power companies in the U.S. are raising prices and increasing capital expenditures to expand infrastructure. Oncor Electric Delivery Company in which Sempra holds an 80.25% stake?expects the?majority? of the projects to be constructed. The projects should be completed between 2026-2034. Reporting by Katha Kalya in Bengaluru, Editing by Shailesh Kuber
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Hungary's Lake Velence is drying up and threatening tourism, wildlife and
Experts and locals say that the water level in Hungary's largest lake will?fall to new lows due to climate change and years of mismanagement of water. This could threaten its ecosystem and tourism sector. Experts say that Lake Velence is a popular destination for holidaymakers, but the water level may soon be too low to allow swimming and sailing. A recent warm day saw children playing on newly exposed sandbanks that extended far beyond the shoreline of the lake. Rental boats were resting at a jetty, now far away from the water, and on the sand. Data from the National Directorate General for Water Management revealed that the lake level in the town of Agard measured 56 cm, only 3 cm higher than the 'historic low' of 53 cm, which was recorded in 2022 - the year Hungary suffered an extreme drought. The water level was 80 cm in the early months of 2026. Experts warned that without substantial rain, the water level could drop by as much as half a centimetre per day, and reach as low as 30cm by summer's close. Tibor Horanyi, from the Association of Great Lakes, said that the water level would drop by at least 25-30cm in the next 30-40days and that the record low will be reached within days. Horanyi said that the problem was not just climate change, but also decades of poor water management. Businesses have already been affected by the disruption. Peter Szaniszlo, a sailing instructor, has started moving his operations to the?Lake Balaton. "Most people who wanted to learn how to sail chose me because Lake Veence is near Budapest. "Now they have to go to Balaton," said he. GOVERNMENT PLEDGES TO ACT Laszlo Gájdos, the Minister of Environment, met last week with local mayors, water management experts, and NGOs to discuss the future of the lake. Gajdos stated in a Facebook post that the government is working to improve the water quality and restore the shoreline. It will take some time to figure out how to replenish water in Lake Velence, according Arpad 'Pal Eotvos the mayor of Gardony a town located on the lake. Eotvos stated, "We'll have to adapt to this." As the climate changes, so will we. (Written by Anita Komuves, edited by Alexandra Hudson).
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In May, the share of Russian aluminium in LME stocks rose to 93%.
Data from the London Metal Exchange showed that, in May, the share of Russian-origin aluminum stocks in London Metal Exchange warehouses increased to 93%, up from 72%, in April. This was due to traders' decision to withdraw Indian metal. The total available or on-warrant aluminium inventories (0#MALSTXLOC>) on the LME dropped 23% to 254,625 tons in May, and now stand at 250 525 tons. This is the lowest level since May 2025. Production and logistics constraints in the Middle East are limiting global supply. Absolute terms, the amount of?Russian aluminum available in May fell by 3,950 tonnes to 237.175. The?share of?Russian aluminium rose however as Indian stocks fell by a greater 71,750 tonnes. After the withdrawal of 2,275 tonnes of Indonesian aluminum, the LME warehouses only had?17.450 tons of Indian aluminium left at the end May. In March, the share of Russian aluminium had reached 92% before Indian aluminum was placed back on warrant. Many traders do not want to deal with Russian metal, even though it can be traded if it was produced before April 13, 2020. To comply with Western sanctions, aluminum produced in Russia after that date is not allowed to be stored at the LME warehouse system. The share of Chinese copper in the LME's copper stock increased to 53% from 51% in April, despite the fact that the total amount dropped by 36,425 tonnes to 141.025 tons. The total?available copper stock decreased by 79.375 tons, to 266,875 tonnes. At the end of December, the?share of Chinese nickel remained at 71% of LME stock. Reporting by Tom Daly. Mark Potter (Editing)
Heavy oil lack spells greater cost for carriers, roadway builders
Mexican export cuts and a rerouting of Canadian output are shrinking currently limited supplies of heavy crude in the Atlantic basin, increasing refiners' expenses with a likely knockon impact to industries ranging from shipping and construction to Middle Eastern power plants.
Extended OPEC supply cuts and worldwide sanctions on Venezuela, Iran and Russia had already caused shortages of heavier crude, with the complex refineries developed to process it, such as those in the U.S. Gulf, struggling to discover low-cost products.
Heavy-sour crudes yield more recurring fuel oils that are either upgraded into higher-value roadway fuels, or converted into marine fuels and bitumen.
The mix of tighter heavy crude and fuel oil materials, along with the seasonal rise in power generation demand is expected to rise fuel oil fractures in the weeks ahead, stated Vortexa expert Xavier Tang, referring to the spread between the price of crude and the refined product.
More marine fuel oil is required by ships making longer trips around Africa to prevent the Red Sea location, while in summertime Saudi Arabia burns more fuel oil for cooling and demand also increases from greater building and construction and road-laying activity.
Mexico cut crude exports in April to facilitate higher domestic processing as it looks for to end a pricey reliance on fuel imports. That more threatened sour supply in the Atlantic basin where refiners have been preparing for the opening of the Trans Mountain pipeline expansion which will divert more heavy Canadian crude to the Pacific.
Heavy crude rates in the U.S. Gulf skyrocketed as refiners sought replacement supply, with the Mars grade hitting a near four-year high versus WTI on April 1 according to LSEG information.
U.S. Gulf refiners have a lot more costly Canadian base feedstock through pipelines, they have less Mexican available, and as a repercussion other heavy-sour alternatives are significantly more pricey, stated Viktor Katona, lead crude expert at Kpler.
In Europe, the Argus Brent Sour index - that includes Norway's flagship Johan Sverdrup grade - hit a 14-month high in mid-April and is still trading approximately in line with light-sweet benchmark dated Brent, according to cost firm Argus Media.
Although costs cooled slightly as Mexican domestic crude demand increased by less than expected, freeing up more for export, the sour market remains structurally tight.
The worldwide crude slate is getting increasingly lighter and sweeter as a direct result of constrained OPEC production, meanwhile non-OPEC+ countries are providing growing volumes of lighter, sweet crude, stated Jay Maroo, head of market intelligence at Vortexa, referring to the Organization of the Petroleum Exporting Countries and its allies such as Russia.
Unless there is any major change in course by OPEC, it's. hard to see that pattern reversing.
Light and medium-sweets have accounted for more than 50% of. Europe's unrefined imports considering that 2019 according to Kpler data. Medium and heavy-sours comprised just 26% of the continent's. imports in the very first four months of 2024, the lowest given that at. least 2012.
STABILIZING ACT
High-density, higher-sulphur crudes are harder to improve and. for that reason typically cheaper than lighter oil. The greater rates. are a specific headache for refiners who invested in the. expensive upgrading units that permit them to process the heaviest. grades.
The absence of heavy sour crudes goes directly against. refinery profitability and it is a waste of capex for complex. refineries, stated Rystad Energy's vice president of oil market. analysis Patricio Valdivieso.
Refiners will have to adapt to an absence of heavy crude like. Mexican Maya by mixing any other comparable grades they can discover. that would match their configuration, according to Hillary. Stevenson, director at IIR Energy.
Making the most of the relative abundance of light crudes. might show economically and operationally hard for U.S. refiners.
If they attempt to go lighter, the end impact would be lower. success, stated Rommel Oates, founder of Refinery. Calculator, adding that a lighter crude diet can impact the. stability of a refinery's downstream systems.
Refiners can stabilize a lighter crude diet plan by feeding. recurring fuels into secondary systems. U.S. Gulf refiners could. process as much as 50,000 bpd extra of Mexican fuel oil to replace. heavy crude, according to FGE expert Francisco Goncalves.
That may not be possible for Europe's refineries nevertheless,. which would have a hard time to process such heavy-sour fuel oil into. road fuels, Kpler's Katona included.
Prior to 2022, Europe's primary source of heavy fuel was. Russia, but the G7 embargo over its invasion of Ukraine has actually cut. off access to refinery feedstocks such as vacuum gasoil and. straight-run fuel oil.
In Northwest Europe, high-sulphur fuel oil barge fracture. spreads versus Brent futures struck their greatest considering that Jan. 4 at. around an $11 discount on Wednesday, according to Argus Media. price data.
A tighter fuel oil market is surely also at play, stated. Sparta Commodities expert Neil Crosby.
(source: Reuters)