AFP: Asian markets mostly rose on Wednesday, and oil prices dipped following another tech-led advance on Wall Street, as the United States hit Iranian missile sites near the key Strait of Hormuz and Tehran struck crude-producing Gulf neighbours.
While the war in the Middle East shows no sign of ending and oil has stuck around $100 a barrel — threatening to fuel a fresh inflation spike — equity traders have shifted back into the market after the steep losses suffered at the outset of the conflict. However, analysts warned the positive mood could fade if the crisis drags on and energy costs spiral with Hormuz — through which a fifth of global oil and gas flow — effectively closed by Iran.
That comes with central banks increasingly in a bind as the need for lower interest rates to support the economy goes up against the prospect of rising prices, which would need higher borrowing costs. In a bid to ease traffic through the crucial strait, US forces dropped several 5,000-pound (2,250 kg) bombs on hardened Iranian missile sites near the coast, Central Command said. Iran has sought to extract a heavy toll on the global economy in retaliation for the US-Israeli attack, including by driving up the cost of oil. US President Donald Trump said allies, which have largely distanced themselves from the war, were not lining up to help escort tankers through Hormuz.
The attacks came as Israel announced it had killed security chief Ali Larijani, a key force leading Iran since the death of Supreme Leader Ali Khamenei in the first strikes of the war. Meanwhile, Saudi Arabia intercepted six drones and Kuwait’s air defences responded to a rocket and drone attack, authorities from both countries said, while two people were killed by missiles near Tel Aviv. Israel also hit a central Beirut neighbourhood as it looks to target Hezbollah.
Rystad Energy estimated just 12.5 million barrels per day of Middle Eastern oil remains online, down from the 21 million per day pre-war base.”But the 12.5 million bpd figure is not secure,” Rystad said. “If the situation persists, the drop in departures could start feeding through into additional export losses in the weeks ahead, as producers face growing difficulty moving crude out of the Gulf.”Still, oil prices fell, with West Texas Intermediate losing more than one percent to sit around $95, while Brent dipped 0.8%, though it was still holding above $102. And stocks continued to rise following gains on Wall Street that were helped by tech giants including Apple and Amazon.
Seoul jumped more than three percent thanks to a surge in chip giants Samsung and SK hynix. Tokyo was up more than two percent, while Taipei, Sydney, Singapore and Wellington also rallied. Hong Kong and Shanghai dipped.”Asia is picking up the baton with a cautiously constructive tone… suggesting the market is actively choosing to look through the geopolitical noise rather than price it in,” wrote SPI Asset Management’s Stephen Innes. However, analysts warned that traders might begin to rethink their positions the longer the conflict continues.
Focus is also on the Federal Reserve policy meeting that concludes later Wednesday. The bank is expected to keep borrowing costs on hold but will release its “dot plot” forecast for rates in the coming months, amid speculation it could be forced to hike again.
