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Oil shock causes record-breaking flight of foreign investors from Indian assets, causing rupee to plummet
The rupee is in a tailspin as foreign?investors pull out at record rates from Indian bonds and equities. This is due to the Iran War-driven rise?in oil price, which has sparked a flurry of 'worries about a possible increase?in inflation. Since the beginning of the war on February 28, foreign investors have sold an estimated $12.14 billion in Indian shares, marking the largest monthly outflow ever recorded. The net bond sales of foreign portfolio investors under the Fully Accessible Route, or FAR, reached 152 billion rupees (1.6 billion dollars), the highest amount since the category was first introduced six years back. The?rupee has fallen to new all-time lows due to these outflows and risk-off sentiment. The local currency dropped 0.9% on Friday to 94.7875. It has fallen about 4.2% since war began. This is compounding the losses of?foreigners and has likely hastened their exit from Indian assets. India faces increased macro-risks as a result of the war against Iran. The conflict has been ongoing for nearly a month. India imports between 85-90% its crude oil, making it vulnerable to rising oil prices. The rupee's volatility and Indian equity prices are expected to rise as a result of the?worries. Economists have revised up their inflation forecasts. They've also downgraded growth estimates and included a steeper depreciation of the rupee in their "baseline". The escalation of the Middle East has brought energy risks to the forefront of India's macro outlook, with the oil?price, the rupee, and the current accounts now closely?intertwined. ", said Krishna Bhimavarapu. APAC Economist, State Street Investment Management. Since the war, hedging costs for rupee depreciation also increased. The increased volatility expectations and this have eroded foreign investor's interest in Indian bonds and stocks.
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Sources say Asian refiners are switching from Dubai to Brent for US crude pricing
Three sources in the refining industry said that Asian refiners have begun to price U.S. crude oil purchases against the global benchmark ICE Brent rather than Dubai after Middle East benchmark ICE Dubai spiked to'record levels' this month. One of the traders said that the move could result in a reduction in liquidity on the Middle East benchmark derivatives market, as traders switch hedges to ICE Brent. Asian buyers have just started booking U.S. cargoes to be delivered in July,?he said. He added that Japanese refiner Taiyo Oil purchased 2 million barrels. Light crude was offered via a tender for delivery in July at a price of $19 a bar above ICE Brent. The Japanese refiner, who typically purchases WTI crude at prices pegged to Dubai, declined comment. The same source reported that other Japanese refiners had also purchased U.S. Crude priced against ICE Brent in place of Dubai. The source said that details of these deals could not be immediately revealed as they were done in private negotiations. Dubai's oil price soared to a record high of $169.75 per barrel last week, surpassing Brent. The Middle East now supplies the most expensive crude in the world. This is because S&P Global Platts?excluded?three of five crude grades? in anticipation of a long-term disruption in shipping through the Strait of Hormuz. Dubai prices have been supported by the strong demand of TotalEnergies, a French company. Traders said that due to the volatility of the market, Asian refiners requested the top?exporter Saudi Aramco switch its 'benchmark' from Platts Dubai to ICE Brent. Outside of office hours, it was not possible to reach Saudi Aramco for a comment.
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The PM has said that the government of Romania could reduce temporarily the excise taxes on fuels.
In a recent media interview, Prime Minister Ilie Bolojan stated that Romania's broad coalition could decide to lower excise duty?on fuels temporarily next week to combat the economic repercussions of the Iran war. The government approved the first set of measures on Thursday. These include limiting the exports of gasoline and the amount of biofuel that can be added to it for three months, as well as capping the fuel price increase at the average level of last year. After criticism by employers and unions, the approved measures were 'watered-down' from their initial plans. Leftist Social Democrats, government's biggest party and vocal critic of Bolojan, also asked for the government to?lower the excise tax. Bolojan, a journalist for the news website G4media.ro, was quoted by the site as saying: "From the standpoint of excise duty, it is the simplest solution and we are very likely to go for this aspect." "On the other hand, it is important to estimate the amount of a reduction in excise duties that the Romanian government - and the state as a whole - can support, for how long. Unfortunately, we cannot predict the duration of the war with Iran." The Finance Ministry approved earlier this month a 652 mil lei (147.23 mill) scheme of?state assistance? to offset?partially the gasoline prices? for road transporters. Farmers will also receive a similar scheme. (Reporting and editing by SonaliPaul; Luiza Ilie)
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For hungry markets in Europe, it was the kids' menu.
Stella Qiu gives us a look at what the future holds for European and global markets. Investors who bet on TACO'seemed to have gotten what they wanted. Donald Trump, after Nasdaq fell?into correction area overnight, announced that he would delay his planned attacks on Iranian power stations for another 10 days. The price response?has?not been as completely awe-inspiring as he had hoped. Brent crude futures fell less than 1%, to $107.24 per barrel. This is a small decline after a nearly 6% rise overnight. Wall Street futures are up 0.4% but this is nothing compared to the surge on Tuesday, when Trump extended his 48-hour deadline?to five days. The EuroStoxx 50 futures in Europe rose by 0.5% while Treasuries, the dollar and other currencies are mostly flat. Investors may be growing numb with Trump's verbal assurances. Some thought that by extending the date twice, Trump was merely pushing the issue?down to the future, which would suggest the war will not end anytime soon. Reports that an additional?10,000 U.S. soldiers may be headed to the Middle East fueled fears of a ground conflict. Mission creep could drag the U.S. to a full-blown war. However, there is no guarantee that the Strait of Hormuz will be opened anytime soon. This led to cautious trading over the weekend. MSCI's broadest Asia-Pacific share index outside Japan has fallen over 11% since its peak at the end of February. Japan's Nikkei fell 10% from its peak in February. South Korea's KOSPI fell 1.5% bringing their weekly loss to an imposing 7%. Central banks warn against raising rates if they can, to combat a stagflation-like threat, similar to the 1970s. Norges Bank in Norway raised eyebrows on Thursday with a "spectacular" U-turn, saying it would not be raising rates this year despite previously predicting three reductions by 2028. Both Governor Michael Barr and Vice-Chair Philip Jeffers sounded worried about sticky inflation. Three of their colleagues are scheduled to speak later today. The markets will be listening out for more hawkish opinions. The stakes are high, given the recent seismic shift in market pricing. A rate increase in September is already priced in at about 50%. Fed officials were predicting a rate reduction this year. The following are key developments that may influence the markets on Friday. The Middle East Conflict: Recent Developments Retail sales in the UK are published for February Thomas Barkin and Anna Paulson, as well as Mary Daly, Fed officials speak
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INDIA BONDS - Fuel tax cuts in India deal a fresh blow to bonds amid oil boom and heavy debt supply
Indian government bonds fell after New?Delhi’s excise duties on fuel clouded fiscal?outlook. This exacerbated market anxiety, already stoked due to the war-driven rise in oil prices and heavy debt supply. As of 10:40 am IST, the benchmark 6.48% bond yield for 2035 was 6.9256%. It had closed at 6.8750% during the previous session. The yield had reached 6.9523% earlier in the day. This was its highest level since July 2024. Bond yields are inversely related to bond prices. The bond market is caught up in a storm caused by adverse triggers which have pushed yields upwards. The end of the financial year is not what the market or regulator may have wanted, according to a trader at a private banking firm. New Delhi has reduced the special excise tax on petrol from 13 rupees to 3 rupees a litre. The duty on diesel was also reduced to zero rupees from 10 rupees, as fuel prices remain volatile and supplies are 'choked' by the Middle East - war. The impact of the duty reductions on the Indian government is estimated by economists at $15.91 billion to $16.97 billion for fiscal year 2027. Brent crude is hovering around $105 a barrel. Energy shipments have been halted through the Strait of Hormuz due to the war. The Strait of Hormuz carries one-fifth of all oil and LNG supplies in the world. India is the third largest crude importer in the world. High oil prices threaten to worsen inflation at home and increase the current account deficit. India has'retained' its inflation target of 4% over the next five-year period. Demand has also been impacted by supply pressures. Indian states are looking to raise 429.4 bn rupees via bond sales in the coming days, after raising a record 12.31 trln rupees during this financial year. As oil prices and Treasury yields remain high, India's overnight swap rates (OIS) have been under a lot of pressure. The two-year OIS was trading at 6.2850%, but the one-year OIS had not been traded yet. The liquid rate for five-year swaps was 6.65%.
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REFILE-Asian government scrambles to assure markets after Middle East war saps market confidence
As the U.S.-Israeli conflict with Iran continues, a growing number of governments are scrambling for liquidity and to calm the financial markets. This is due to the pressure that the war on Iran has placed on their currencies, and the volatility in the market. How different countries respond: SOUTH KOREA South Korea is planning to 'buy back emergency bonds worth 5 trillion won ($3.32 billion), to inject liquidity into the local bond market, and to cap rising yields. This comes after three-year treasury yields reached their highest level since mid-2024. The ministry has also extended fuel tax reductions and is currently drafting a 25 trillion won supplementary budget, which could include vouchers of cash for consumers and financial assistance for businesses. The Finance Ministry aims to submit the budget to the Parliament by March's end. The Japanese government will use?800 billion ($5 billion) of reserve funds to fund subsidies that aim to keep gasoline prices at around 170 yen a litre. The measure could cost up to 300 billion yen a month. The Middle East Crisis is driving energy prices sharply upwards. PHILIPPINES On March 26, the Philippines' central banks convened an unexpected, off-schedule, policy review. It said it was to reassure the market that they were?assessing the situation. It signaled that it would be ready to act if inflation expectations dropped. AUSTRALIA The Australian government has yet to make any major policy changes, or proposals. They have only taken steps to ensure the imports of fuel and diesel which are in short supply due to panic-buying. Prime Minister Albanese will meet with state premiers and chief minsters next week in order to devise a plan for managing the fuel crisis. The government anticipates that the crisis will last several months. The government has not considered fuel rationing, but it may consider other voluntary measures such as encouraging people to work at home. In May, the government will release its budget for 2026/27. It is being urged to reduce spending while some groups push for energy relief policies such as cutting taxes on fuel or providing direct assistance to households and small businesses. The government is considering taxing "excess profits" made by Australian gas companies to raise much-needed revenues. The central bank of Australia is more worried about inflation than economic development and has raised interest rates twice this year, to 4.10%. It could raise them again in May. NEW ZEALAND New Zealand 'has temporarily aligned its fuel standards with Australia in order to increase the import options. It will also provide temporary weekly assistance of NZ$50 (US$29.30) to low-income families from April to offset rising costs. The government also updated its National Fuel Plan and made it public. It outlines four phases of response for petrol, jet fuel and diesel fuel.
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Oil prices set to fall the most in a single week since 6 months
Oil prices dropped on Friday, and were on track to have the steepest weekly drop?in the past six months. This was after U.S. president Donald Trump announced that talks with Iran on a 'peaceful end' had been going well and he would pause his attacks on Iran’s energy plants for ten days. Brent futures dropped 84 cents or 0.8% to $107.17 a barrel at 0353 GMT. U.S. West Texas Intermediate Futures lost $1.02 or 1.1% to $93.46 a barrel. On a weekly basis, both benchmarks traded 4.6% lower despite Brent increasing 5.7% and WTI gaining 4.6% Thursday due to fears of a further escalation in the war. Oil is not only trading on headlines, but also the length of war. Priyanka?Nova, an analyst with Phillip?Nova, said that any direct damage to the oil infrastructure or prolonged war could 'force markets to quickly reprice higher. Trump has announced a pause on attacks against Iran's energy grid, but the U.S. also sent thousands troops to the Middle East. Trump is weighing the use of ground forces to take over Iran's strategic oil center of Kharg Island. A senior Iranian official said that the 15-point U.S. plan, which was sent to Tehran by Pakistan, was unfair and "one-sided". The war has deprived the world of 11 million barrels per day of oil, according to the International Energy Agency. Macquarie Group analysts said that if the war ends soon, oil prices will drop quickly, but remain at pre-conflict level. They said that prices could increase to $200 if war continues until the end of June. The market is becoming more and more pressured with each passing day. Mukesh sahdev, CEO and founder of the Australia-based consultancy XAnalysts, said that Asian countries are 'tapping buffer stocks' to adjust demand. Helen Clark reported from Perth, and Sudarshan Varadhan from Singapore. Sonali Paul and Saad Saeed edited the article.
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Chicago oilseeds and grain futures are wracked by uncertainty over the Iran war
Chicago oilseeds and grain futures fluctuated on Friday between 'gains and losses' as investors watched?developments? in the Middle East, amid mixed signals?from the U.S.?and Iran?about efforts to?end the war. The Chicago Board of Trade's (CBOT)?most active?corn contract gained 0.1%, to $4.67-1/4 a bushel. It has been up 0.4% this week. CBOT Wheat lost 0.1%, to $6.04 1/2 a bushel. However, it was up 1.6% this week. Soybeans rose 0.1% to $11.74 1/2 a bushel to bring the weekly gain to 1.1%. As they are used as biofuel feedstock, corn and soybeans tend to follow the movements of oil prices. Oil prices dropped in early trade and were down for the entire volatile week. U.S. president Donald Trump announced that talks with Iran on ending the war are going "very, very well." He also said he will pause his attacks against the energy plants of the country for 10 days. A senior Iranian official, despite Trump's optimistic assessment, said that the U.S. plan to end the conflict was "unfair and one-sided." Iran has continued to strike bases in Israel and the United States as a form of retaliation against U.S.-Israeli strikes. The Iranians also attacked Gulf States and blocked Middle East fuel imports via the Strait of Hormuz which transports about 20% of world oil and LNG. Iran has stated that it is not in talks with Washington. The traders are also waiting for a possible announcement on revised U.S. biofuel targets during a White House event that will take place later today. The U.S. Department?Agriculture will release its acreage estimates on Tuesday. Due to rising fuel and fertiliser prices caused by the Middle East War, the market is keenly interested in the planting decisions of farmers. The Russian Federation, which controls 40% of the global ammonium nitrate trade, announced on Tuesday that it would suspend its exports until April 21, to ensure a sufficient supply for the spring planting season. (Reporting and editing by Lewis Jackson, Sumana Nady and Subhranshu Sahu; Daphne Zhang)
Countries' strategies not yet aligned with tripling renewables capacity goal
Nations' climate strategies are not yet in line with an objective to triple renewable resource capability worldwide by 2030 which was set at the COP28 climate summit in Dubai last year, a report by the International Energy Firm ( IEA) stated on Tuesday.
WHY IT is necessary
The target would involve increasing set up sustainable energy capability to at least 11,000 gigawatts (GW) by the end of the years, compared to 4,209 GW in 2023.
Extremely few countries - just 14 out of a total of 194 - have included specific targets for overall sustainable power capacity for 2030 in their commitments under the Paris Arrangement environment pact, called nationally figured out contributions (NDCS).
Authorities commitments in current NDCs amount to 1,300 GW--. simply 12% of what is needed to fulfill the global tripling. unbiased set in Dubai, the IEA said.
BY THE NUMBERS
The domestic goals of federal governments in nearly 150 countries. across the world go further than commitments under NDCs,. representing practically 8,000 GW of set up eco-friendly capability. by 2030.
That suggests that if nations were to consist of all their. existing policies, strategies and quotes in their new NDCs due to. be presented next year, they would show 70% of what is required. by 2030 to reach the tripling objective however the world would still be. 30% short of the goal.
CONTEXT
Countries needed to submit their new or upgraded NDCs every five. years after 2020 so next year they have to consist of modified. ambitions for 2030.
A U.N. climate meeting is happening in Bonn, Germany,. from June 3-13 to work on the brand-new round of strategies, among other. concerns such as climate finance.
KEY QUOTE
This report explains that the tripling target is. enthusiastic however achievable-- though just if federal governments rapidly. turn pledges into plans of action, said IEA executive director. Fatih Birol.
(source: Reuters)