Global oil prices slipped on Monday, retreating from last week’s highs, as investors appeared less concerned about a broader regional conflict despite ongoing missile exchanges between Israel and Iran. Crude fell to $76.53 per barrel, prompting concerns for oil-dependent government budgets, including key assumptions in Budget 2024.
The easing fears came even as cross-border strikes entered a fourth day following Israel’s unexpected attack on Iranian military and nuclear facilities last Friday. That offensive killed several senior Iranian military figures and scientists, briefly sending oil up by as much as 13% amid supply fears.
Despite ongoing hostilities, market sentiment has shifted. Analysts now suggest the likelihood of a broader war has diminished, pushing prices lower during Asian trading.
At the same time, gold prices surged, climbing to around $3,450 per ounce just shy of the all-time high as investors sought safety amid geopolitical and economic uncertainty.
Equity markets were mixed. Gains in Tokyo, Shanghai, and Seoul were offset by losses in Jakarta, Bangkok, and Manila. European markets opened higher, with London, Paris, and Frankfurt posting gains, supported by easing war fears and a weaker yen.
Economic Pressures Mount Ahead of Key Central Bank Decisions
Attention is now turning to a series of high-stakes policy meetings. The US Federal Reserve and the Bank of Japan are both scheduled to meet this week. While no immediate interest rate changes are expected, analysts say central banks face increasing pressure to address inflation risks heightened by volatile energy prices.
Tony Sycamore, a strategist at IG, warned that if oil remains elevated, core inflation could rise as higher transport and production costs ripple through the economy. “Central banks would prefer to treat energy shocks as temporary, but prolonged price pressure could complicate efforts to ease monetary policy,” he noted.
This comes as former President Donald Trump’s proposed tariffs on key imports loom large. Economists warn that a combination of higher energy prices and aggressive trade policy could dampen global growth.
Allen Good, director of equity research at Morningstar, noted that despite geopolitical risk, fundamentals in the oil market remain soft. “OPEC production is steady and demand remains weak,” he said. “We don’t see justification for significantly higher prices unless the conflict escalates further.”
G7 Summit and Trade Tensions in Focus
The Group of Seven (G7) leaders convened in the Canadian Rockies on Sunday, with discussions expected to center on the Middle East conflict and global trade tensions. Washington is also engaged in high-level talks to avert the implementation of tariffs promised by Trump in his campaign platform.
Meanwhile, China’s latest data showed industrial output underperforming forecasts, though retail sales posted better than expected figures. The mixed signals highlight the pressure from ongoing trade friction and slowing global demand.
Corporate Update
In the corporate sector, Nippon Steel shares rose over 3% after President Trump signed an executive order approving the Japanese company’s $14.9 billion acquisition of US Steel. The decision marks the conclusion of a months-long regulatory review.
