When analysts discuss the straight of Hormuz, oil typically dominates the conversation. But this critical waterway also handles massive flows of aluminum, copper, and other industrial metals. Base metals, with the exception of aluminum, have faced heavy downward pressure over the last month as hostilities in the Middle East disrupted commodity supplies and threatened an inflationary shock for the world economy.Metals markets also have been shaken, but a growing prospect of an oil shock that may batter the g ...

The dollar fell against most of its major peers Thursday after key central banks flagged the risk of an inflationary shock amid the intensifying Middle East conflict https://t.co/geTKxwJJes ...

Core Viewpoint - TS Lombard indicates that an inflationary shock is anticipated due to the ongoing war in the Middle East, but the economic impact is expected to be less severe than the oil shocks experienced in the 1970s [1][6]. Oil and Natural Gas Price Impact - World market oil prices have increased by approximately 50%, while natural gas prices have risen even more, with increases of 60% in Europe, 90% in the UK, and less than 15% in the US [2]. - The energy-price component of the Consumer Price Index (CPI) will be affected, but the passthrough effect is estimated to be around 20-40%, indicating that the energy component is less volatile than the underlying commodities [2][3]. Contribution to Inflation - The contribution of oil and natural gas prices to the CPI includes transportation energy and electricity generation, with around 40% of electricity coming from natural gas, which will eventually add to inflation [3]. - In a scenario where oil prices spike to $150 per barrel, the impact on general prices could be an increase of 1.5-2.0 percentage points, which, while not catastrophic, would still pressure real incomes and complicate central bank policies [5]. Central Bank Responses - Central banks that were planning to maintain interest rates in 2026 are likely to continue with that strategy, while those considering rate cuts, such as the Bank of England, face significant challenges due to inflation exceeding targets [7]. - Current expectations suggest that all rate cuts have been postponed as central banks navigate the inflationary environment [7]. Implications for Automotive Markets - The developments in the Middle East are expected to negatively impact global economic growth, leading to increased price inflation and interest rates, which will dampen consumer and business confidence [8]. - Any decline in economic growth will adversely affect demand in automotive markets, impacting profitability across supply chains, as higher inflation and interest rates will influence purchasing decisions and finance costs [9].

Group 1 - The dollar has strengthened due to the ongoing conflict in the Middle East, creating an inflationary shock that benefits oil producers and disrupts expectations for central bank interest-rate cuts [2][3] - The Bloomberg Dollar Spot Index increased by as much as 0.7%, building on a 1.3% gain from the previous week, driven by a rush to hedge against the risks of a prolonged conflict [3] - The dollar's gains are attributed to the United States being the world's largest oil producer, rather than its traditional status as a safe haven, with other safe assets like Treasuries and gold facing pressure [4] Group 2 - Investor sentiment has shifted as the conflict escalates, leading to forced selling and a reassessment of positions, particularly among U.S. investors who initially expected a quick resolution [5] - The options market is experiencing heightened activity, with trading volumes at approximately 150% of recent averages, favoring bullish bets on the dollar [6] - The rise in crude oil prices towards $120 per barrel has reduced the likelihood of Federal Reserve rate cuts this year, prompting investors to push back expectations for a quarter-point reduction to September [7] Group 3 - In Europe, money markets have shifted to anticipate rate hikes from the European Central Bank and the Bank of England, resulting in a significant selloff of the region's bonds [7]

>> GOOD MORNING. THIS IS HORIZONS MIDDLE EAST & AFRICA. PRESIDENT DONALD TRUMP SAYS THE U.S. IS DOING VERY WELL AND ITS MILITARY CAMPAIGN AGAINST IRAN EVEN AS THE TIMELINE INTERJECT GIVES REMAIN UNCLEAR.TEHRAN IS STILL TARGETING ISRAEL AND GO STATES AS THE U.S. SINKS IN IRANIAN WARSHIP, MARKING A FIRST SINCE WORLD WAR II. ASIAN STOCKS REBOUND WITH THE KOSPI JUMPING AND THE REGIONAL BENCHMARK HEADING FOR ITS FIRST GAIN IN FOUR SESSIONS. CAUTION PERSISTS AS OIL AND GOLD CLIMB.JUST GONE 9:00 ACROSS THE EMIRATE ...

Geopolitical Context - The recent hostilities were triggered by a significant US-Israeli military operation that reportedly resulted in the deaths of several high-ranking Iranian officials, including Supreme Leader Ayatollah Ali Khamenei [8] - Iran has declared "total war" and initiated retaliatory strikes across the Gulf, targeting countries hosting US military assets [8][9] Military Engagements - The UAE successfully intercepted a large-scale Iranian attack involving 9 ballistic missiles, 6 cruise missiles, and 148 drones, resulting in three fatalities and 68 injuries due to falling debris [2][8] - In Kuwait, air raid sirens were activated again, with reports of smoke near the US Embassy following an Iranian strike that killed six US service members [3][8] Market Reaction - The S&P/ASX 200 index fell 0.2% to 9,180.70 as investors sought safe-haven assets amid fears of a broader regional conflict [4][8] - Gold miners, including Newmont Corporation, Northern Star Resources, and Evolution Mining, saw gains between 4% and 6% as the market reacted to the "risk-off" environment [5][8] Energy Sector and Commodity Spikes - The energy sector was a standout performer, with the ASX 200 Energy index surging 5.5%, driven by a sharp increase in global oil prices [6][8] - Brent crude oil prices rose as much as 13% intraday, reaching $82 per barrel before stabilizing near $78, with analysts warning that a sustained blockade of the Strait of Hormuz could push prices over $100 per barrel [6][7]