Fitch says Israel's current credit rating level can absorb impact of Israel-Iran conflict
June 16 (Reuters) - Fitch Ratings said on Monday that a spillover from the Israel-Iran conflict appears to be within a range that can be absorbed by Israel's 'A'/Negative rating level.
Fitch also said that it expects the risk premium in oil prices arising from the conflict to be contained within the $5-$10 range and that it does not expect the conflict to persist for more than a few weeks.
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Reuters
18 minutes ago
- Reuters
Rupee posts best week in over two years as dollar's struggles resurface
MUMBAI, June 25 (Reuters) - The Indian rupee had its best week since January 2023, as an Iran-Israel ceasefire cooled oil prices and sapped safe-haven dollar demand, while worries over the Federal Reserve's future independence added pressure on the greenback. The rupee gained 1.3% on the week, its best performance in two and a half years, to close at 85.4750 per U.S. dollar on Friday. Crude oil prices retreated by over 11% this week after Iran and Israel reached a ceasefire following a 12-day war, which saw involvement of the U.S. Meanwhile, the dollar index was down 1.5% on the week as investors, unnerved by fresh signs of an erosion in U.S. central bank independence, wasted no time in pushing the greenback back to its lowest levels in over three years. "Part of the sell-off of the dollar is due to the unpredictability of policy from Washington and that is unlikely to change," MUFG Bank said in a note. The rupee rose this week but it continues to lag behind its Asian peers amid persistent dollar weakness seen over 2025. While currencies like the Korean won and offshore Chinese yuan are up between 2% and 9% this year so far, the rupee is little changed. Bankers and analysts reckon that while the rupee's underperformance is likely to persist, a broadly weaker dollar alongside portfolio inflows should support the currency in the near term. Foreign investors have turned buyers on Indian government bonds over the last few sessions, while block trades and initial public offerings have drawn interest from global investors. Later on Friday, the focus will be on U.S. personal consumption expenditure (PCE) inflation data alongside remarks from Fed policymakers as investors try to gauge the future trajectory of the central bank's policy rates.
Reuters
34 minutes ago
- Reuters
MidEast war highlights key cross-asset trends to watch: Pelosky
NEW YORK, June 27 (Reuters) - The war between Israel and Iran offered a real-time look at some new global cross-asset dynamics that can help investors understand the state of play in the first half of 2025 and what they can expect in the next six months. Amid all the noise of the 12-day conflict, three points stood out. First, the U.S. dollar failed to mount any major advance during the roughly two weeks of the conflict, even though the DXY dollar index was sitting at a three-year low when Israel attacked Iranian nuclear facilities on June 13. Second, the U.S. Treasury market also failed to catch a bid amid the fighting, with the 10-year yield rising around 10 basis points right after the initial strikes. While yields have slipped since then, that appears to be related more to Federal Reserve dynamics than geopolitical drama. And finally, there was oil, where the story was mixed. Prices jumped around 15% after fighting broke out but then rapidly tumbled to pre-conflict levels once it appeared unlikely that there would be any significant supply disruption. So what does this episode tell us? The real-time signals in the dollar and Treasury market reinforce the growing consensus that the U.S. may no longer be the world's safe haven, the world's firefighter, if you will. Instead, in certain instances, America may now be the cause of the fire. This speaks to perhaps the most important market trend of the past six months: the underperformance of U.S. stocks relative to Europe and Asia. Investors appear to be warming to the potential for a secular change in global equity leadership away from the U.S. and toward the rest of the world. The MSCI ACWX index of non-U.S. equities is up more than 13% year-to-date versus a roughly 1% gain for the S&P 500. If this secular leadership shift occurs, it would be accompanied by more dollar weakness as a sustained period of capital repatriation out of the U.S. plays out. This, too, is already showing signs of manifesting with the U.S. dollar index down roughly 10% year-to-date. The upshot of these trends is a rare outcome, notes European investment bank Societe Generale. A broadly diversified portfolio including non-U.S. equity, corporate credit and commodities has outperformed U.S. equity in the year to date. That has only happened two times, on an annual basis, since 2009, according to SocGen. Given all this, what asset classes may be well positioned to outperform in the second half of the year and beyond? One contender could be a long unloved asset class: commodities. First, commodity prices are linked to global economic activity, and there are some bullish growth signals emerging despite the uncertainty about tariffs and geopolitics. For instance, the Citi Global Economic Surprise Index has recently picked up sharply, led by Europe. On top of this, there is the Trump administration's new 'run hot' approach to the U.S. economy. As Treasury Secretary Scott Bessent indicated in an X post, opens new tab on May 18, the administration's goal is to stabilize the debt burden by ensuring nominal GDP remains above interest rates. This reduces the risk of a near-term U.S. recession and, in turn, improves the global growth outlook. And as I've previously argued, we could be in the beginnings of a long global growth cycle underpinned by increased spending in Europe, Asia and North America, the three nodes of what I refer to as the TriPolar World. And that would be highly bullish for commodities. Next, if the U.S. dollar continues to weaken, this should provide a tailwind for commodity demand given that most of these contracts are priced in dollars. Continued dollar weakness, in turn, should allow emerging market central banks with policy space to cut interest rates and stimulate their economies without having to fear the negative exchange rate fallout. This should support both global growth and demand for commodities. In terms of performance, commodities have lagged relative to stocks over the past decade, with the S&P GSCI commodity index generating an annualized return under 3% over that period, opens new tab, compared to more than 11% for the S&P 500, opens new tab. Related to this, consider that the mining industry represented only around 1% of global stocks' market cap, a record-low, as of mid-May, according to an analysis by Crescat Capital. And, importantly, commodities have recently appeared to be on the verge of breaking out on a technical basis, with the S&P GSCI index briefly eclipsing 580 last week as the Middle East conflict was heating up. Of course, commodities could continue to lag if the Trump administration's chaotic economic policies weigh on global growth. But the president's actions since mid-April suggest that he has little stomach for upsetting markets or growth. It's also possible that the 'short dollar' trade, which has become crowded, could reverse. But considering how over-exposed many foreign investors were to U.S. assets coming into 2025, this trade may still have room to run. We obviously have no crystal ball to tell us whether Middle East tensions will rise again, providing more of a tailwind for energy commodities. But investors often wait for moments when fundamentals and technicals are aligned, and the cross-asset moves in recent weeks suggest that could now be the case for commodities. (The views expressed here are those of Jay Pelosky, the Founder and Global Strategist at TPW Advisory, a NYC-based investment advisory firm. You can follow Jay on Substack at The Tri Polar World, opens new tab). Enjoying this column? Check out Reuters Open Interest (ROI), opens new tab, opens new tab, your essential new source for global financial commentary. ROI delivers thought-provoking, data-driven analysis of everything from swap rates to soybeans. Markets are moving faster than ever. ROI, opens new tab, opens new tab can help you keep up. Follow ROI on LinkedIn, opens new tab, opens new tab and X., opens new tab
Telegraph
38 minutes ago
- Telegraph
How the war in the Middle East could see airfares soar
Never one to mince his words, the US president had a withering response to Monday night's Iranian missile assault on Qatar – 'a very weak response, which we expected, and have very effectively countered.' But while Tehran may have failed to land a punch this time around, could their actions end up having negative consequences for your next holiday? If you were planning on a summer break in lovely Tel Aviv, you probably already know the answer to that. But the bigger question for the aviation sector is likely to be what the conflict means for fuel prices – and by extension the price of our plane tickets. According to former British Airways boss Willie Walsh – now head of the global airline industry body, IATA – there is a 'direct correlation' between the price of oil and the cost of our flight tickets. Indeed, Mr Walsh told journalists earlier this month that falling oil costs (at least at the time) could soon see airlines reducing their prices in order to stimulate demand this summer. Of course, that was before the events in the Middle East, when an unexpected Israeli attack on Iranian military targets saw the oil price jump some 8 per cent. Since then, markets have been rushing to process the rapidly developing situation, as the Trump administration has gone from launching its own attack on Tehran to later declaring an official ceasefire between the warring parties. What happens next is anyone's guess. Though City forecasts have been clear that escalation will be bad news for those betting on oil prices. Analysts at Goldman Sachs say that any Iranian action to blockade the Straits of Hormuz – the narrow strip of water through which 20 per cent of oil supply flows – could send prices spiking to the levels not seen since the immediate wake of Russia's invasion of Ukraine. 'A 10 or 20 per cent rise in the jet fuel price is going to have a big impact on airlines,' says John Gradek, an aviation management expert at Montreal's McGill University. Indeed, the IATA estimates that the global aviation sector spends around one third of its entire revenues on jet fuel, making it the single biggest variable for the industry. Bad news, then, that the jet fuel spot price is currently trading 10 per cent higher than before those first Israeli missiles ten days ago. At the same time, though, short-term energy price spikes aren't exactly unprecedented these days and most airlines will have planned for these kinds of scenarios. Hedging your bets One of the most common ways that airlines can prepare for price volatility is to 'hedge' their exposure to the markets by locking in a price well in advance. Given that markets can be volatile, the tactic isn't entirely risk-free – and it also requires airlines to have enough cash to spend it up front – but it can help airlines avoid paying over the odds in times of strife. 'Hedging is there to provide budget certainty for airlines,' says Chris Tarry, founder of aviation consultancy CTAIRA. He points to the example of Ryanair, which recently reported that it had taken advantage of the dip in oil prices in the spring in order to lock in much of its fuel needs for the next three years – a move that now looks very shrewd in the circumstances. This kind of financial planning is one of the reasons why previous fuel price spikes (like the one after Russia's invasion of Ukraine) haven't resulted in the kind of system shock that we saw back in the 1970s. Back then, airlines had no way of avoiding the 400 per cent jump in oil prices, resulting in carriers having to ground their planes or absorb heavy losses. Of course, the longer the higher prices endure, the more problems it will cause for airlines. Right now, markets seem satisfied by the Trump administration's conciliatory tone around a ceasefire – though history shows that things can change quickly. As for whether sustained price pressures would necessarily mean more expensive flights, the jury is still out. On one hand, we know that plenty of airlines have taken that step in the past. Back in 2022, full-service carriers like Emirates, AirAsia and Japan Airlines responded to higher fuel prices post-Ukraine invasion by adding a temporary surcharge (around 10 per cent) on all passenger bookings. Then again, the aviation market remains highly price-sensitive and analysts say that airlines have other ways of mitigating the hit that don't risk losing customers. 'There are lots of things airlines can do in that situation,' says John Gradek. 'Rather than increasing ticket prices, you might see airlines delaying the launch of new routes or reducing services.' Airspace headaches Then there's the other big question posed by the conflict: what happens when it is no longer too safe to fly over parts of the Middle East? Right now, we've seen flights being directed away from Iran and over Saudi Arabia – something that Lufthansa says has added one hour to its Europe-to-Asia flights – but that isn't without consequences for the industry. 'Even a slight rerouting can be an issue for the bottom line,' says Chris Tarry. The longer that planes have to spend in the sky, the more fuel they are using, without any additional revenue to make up the difference. What's more, delayed arrival times also cause issues with turnaround, the all-important process of getting planes ready to depart again. All things considered, then, airline bosses will have even more reason to keep their eyes on how events develop in the coming weeks and whether that much-vaunted ceasefire can hold. And at least they can rest assured that they have a powerful ally on that particular front. 'Everyone, keep oil prices down. I'm watching!' posted Donald Trump on his social media platform on Monday. If you're planning on taking a long-haul flight this autumn, you might want to hope that he gets his way.
