Asian markets declined significantly due to rising oil prices and Middle East tensions, with Hong Kong, Shanghai, and Shenzhen leading the losses. European markets are also set for further declines ahead of ECB meetings and potential US attacks on Iran.
Asia-Pacific markets are expected to open lower, mirroring Wall Street's decline, as elevated oil prices due to Iran-US tensions fuel inflation concerns. Israel and the US are prepared to strike Iran again if necessary.
Japan's government approved a ¥3.1135 trillion supplementary budget to address rising oil prices due to Middle East tensions. The plan includes a ¥2.5 trillion reserve for fuel subsidies and support for electricity/gas bills, funded by deficit-covering bonds.
Eurozone inflation hit 3.2% in May, the highest since Sept 2023, driven by oil prices from the Iran war. Energy costs rose 10.9%. The ECB is expected to raise interest rates in June.
India's economy has been repeatedly reshaped by oil shocks, from inflation and forex pressure to wider economic shifts. The country has navigated five decades of crude disruptions, from the 1973 Arab embargo to the recent Hormuz crisis, adapting its policies and sourcing strategies.
Arvind Panagariya, Chairman of the 16th Finance Commission, advised the Reserve Bank of India to allow the rupee to depreciate rather than defend it with forex reserves, citing rising oil prices. He believes defending the currency is a losing strategy that drains reserves.
European stocks opened lower Monday amid rising oil prices and bond sell-offs, driven by U.S.-Iran tensions. Ryanair shares dropped despite reporting a profit increase.
The Indian rupee hit a record low of 95.7450 against the US dollar due to rising oil prices, overseas debt repayments, and importer demand, despite RBI interventions. Economists link the pressure to the US-Iran conflict, which has increased oil prices by nearly 50% since February 28, causing the rupee to weaken by over 5% in the same period.
India's state-run oil companies are absorbing nearly Rs 30,000 crore in monthly losses to maintain stable petrol, diesel, and LPG prices amidst soaring global energy costs. This financial burden arises from crude oil price surges and supply disruptions in West Asia, with the government prioritizing consumer protection.
Long-term UK borrowing costs hit 28-year high on expectations of higher inflation, and speculation that local elections could prompt leadership challengeFull story: UK’s long-term borrowing costs hit highest level since 1998HSBC profits fall amid $400m fraud-related charge and Iran warAustralia hikes interest rates to 4.35% in blow to mortgage holdersThose credit losses have “overshadowed” HSBC’s results in the last quarter, reports Will Howlett, financials analyst at Quilter Cheviot:HSBC’s quarter was dominated by a sharp and unexpected jump in credit losses, which took the shine off otherwise solid trading and pushed profits just below expectations. A $400m fraud-related loss in the UK drove a marked rise in bad loan charges and has put fresh focus on the risks sitting within more complex lending, even as the rest of the loan book remains stable.Profits were broadly flat on last year, as higher income was absorbed by rising costs and credit charges. Revenues grew 4%, slightly ahead of expectations, helped mainly by fees rather than interest income. Wealth management continued to perform well, though growth has slowed from last year’s pace.“HSBC’s results always bring more of an international flavour than its UK peers. Unfortunately that means the Hormuz crisis looms large in the results, casting a shadow over an otherwise solid set of numbers.The theme is grimly familiar to investors; were it not for the crisis, earnings outlooks would be much rosier. The warnings around the economic impact will only continue to grow the longer the situation remains unresolved.” Continue reading...
Rolling coverage of the latest economic and financial newsHSBC profits fall amid $400m fraud-related charge and Iran warAustralia hikes interest rates to 4.35% in blow to mortgage holdersThose credit losses have “overshadowed” HSBC’s results in the last quarter, reports Will Howlett, financials analyst at Quilter Cheviot:HSBC’s quarter was dominated by a sharp and unexpected jump in credit losses, which took the shine off otherwise solid trading and pushed profits just below expectations. A $400m fraud-related loss in the UK drove a marked rise in bad loan charges and has put fresh focus on the risks sitting within more complex lending, even as the rest of the loan book remains stable.Profits were broadly flat on last year, as higher income was absorbed by rising costs and credit charges. Revenues grew 4%, slightly ahead of expectations, helped mainly by fees rather than interest income. Wealth management continued to perform well, though growth has slowed from last year’s pace.“HSBC’s results always bring more of an international flavour than its UK peers. Unfortunately that means the Hormuz crisis looms large in the results, casting a shadow over an otherwise solid set of numbers.The theme is grimly familiar to investors; were it not for the crisis, earnings outlooks would be much rosier. The warnings around the economic impact will only continue to grow the longer the situation remains unresolved.” Continue reading...
Spirit Airlines has ceased operations after canceling thousands of flights this weekend, marking the end of a budget carrier that hadn't turned a profit since 2019. The airline cited a sharp rise in oil prices stemming from the US-Israeli conflict with Iran as the final blow to its struggling business. Transportation Secretary Sean Duffy blamed the Biden administration for blocking a proposed merger with JetBlue, while Senator Elizabeth Warren defended the decision, noting a Reagan-appointed judge ruled the deal illegal.
Oil prices above $111/barrel have triggered a seismic shift in electric vehicle interest, with Renault UK reporting 42% more enquiries and EVs now comprising 50% of its sales. Meanwhile, UK house prices rose 0.4% in April despite economic gloom, NatWest reported £1.4bn Q1 profits but set aside £140m for geopolitical risk, AstraZeneca fell 1.9% after US regulators rejected its breast cancer drug, and Diageo rose 2% after Trump removed Scotch whisky tariffs.
The KOSPI fell 1.38% on Thursday as investors cashed in gains following record highs. Rising oil prices due to Middle East tensions and a hawkish Federal Reserve interest rate decision weighed on market sentiment despite strong tech earnings.
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Japanese sento (public baths) face crisis as oil price surge adds to challenges of shrinking customer base and ageing owners without successors. Ikesu Onsen, a family-run sento founded in 1919 in Tsushima, Aichi prefecture, has been forced to delay opening by an hour since late March due to unstable fuel oil supply, with monthly delivery halved to around 500kg, losing about 10 customers daily.
The Indian rupee's trade-weighted real effective exchange rate fell to 92.72, its lowest in over a decade, driven by Iran war-driven crude oil price surge and significant foreign portfolio outflows. The 6-currency REER dropped to 89.61, a record low since April 2015. Despite the currency hitting a record low of 95.21 per dollar in late March, analysts see limited near-term recovery prospects due to oil import demand and equity outflows, though long-term investors may find the current valuation attractive.
Brent crude prices rose to $99.89 on April 21 amid supply disruptions in the Strait of Hormuz. The resulting inflation pressure has led markets to scale back expectations for Federal Reserve rate cuts, creating a challenging macro environment for Bitcoin and other risk assets.
Oil prices have climbed back above $100 a barrel, with Brent crude nearing $103, following US President Donald Trump's threat to blockade the Strait of Hormuz. This potential disruption to a vital shipping lane is driving up energy costs and impacting household budgets and food prices.
