The Bank of Japan’s decision to raise a key interest rate is expected to have both positive and negative impacts on households and businesses. While interest earned on bank deposits will increase, burdens from borrowing, such as housing loans, will rise. Whereas the elderly are expected to benefit greatly from the interest rate hike, younger people are likely to be adversely affected.

In response to the central bank’s decision, three major banks -- MUFG Bank Ltd, Sumitomo Mitsui Banking Corp and Mizuho Bank Ltd -- announced Tuesday that they would raise interest rates on savings accounts by 0.1 percentage points to 0.4 percent, effective August 3. The rate stood at 0.001 percent in March 2024, when the Bank of Japan ended its negative interest rate policy, meaning that the new interest rate represents a 400-fold increase.

For MUFG and Sumitomo Mitsui, this will mark the highest level in 34 years, or since August 1992, at a time when the two banks had yet to be formed through mergers of their various predecessors. As for Mizuho, the new interest rate will be the highest level since the bank’s founding in 2002.

According to estimates by the Mizuho Research Institute, the overall household economy will see a net gain of ¥1 trillion per year after balancing the positive and negative effects of the interest rate hike. This will be primarily due to an increase in interest income, which translates into an average annual gain of ¥20,000 per household.

However, the degree of the benefits will vary for each household depending on the size of their deposits and borrowings. Generally speaking, older people with larger financial assets will benefit more from increased interest income, while younger households with large outstanding housing loans will tend to be more negatively impacted.

According to the company that operates mogecheck, a site comparing mortgages, in a case where ¥50 million is borrowed on a 35-year variable-rate mortgage and the variable interest rate rises to 1.25 percent, the monthly payment will increase by ¥5,900 to reach ¥147,043, compared to before the hike. Since 80 percent of mortgage borrowers choose variable-rate loans, many households are expected to be affected.

The total repayment amounts for student loans, education loans and auto loans are also expected to rise. As interest rates are determined based on various factors, such as government bond yields, borrowers may be forced to revise their repayment plans.

As the interest burden of borrowing increases, the interest rate hike will inevitably affect corporate management. Mizuho Research Institute estimates that ordinary profit across all industries, excluding the finance and insurance sectors, will be reduced by 1.0 percent, or about ¥1.1 trillion. Small and medium-sized companies with low profits against interest-bearing debt will tend to be affected. Businesses with capital of less than ¥10 million are projected to see their ordinary profit decline 6.6 percent.

Looking Back on 1995

The year 1995 — the last time the Bank of Japan’s key interest rate was at 1 percent — witnessed a series of major events, such as the Great Hanshin Earthquake and the sarin gas attack on the Tokyo subway.

On the economic front, the prolonged economic slump following the collapse of the bubble economy brought down a number of financial institutions, as they struggled with nonperforming loans. With the consumer price index stuck at zero percent growth, the nation fell into a long period of deflation.

The BOJ was in the process of cutting interest rates, lowering the official discount rate -- then the policy interest rate -- from 1.75 percent to 1 percent in April, and then to 0.5 percent in September.

Along with the economic slump, successive failures of banks and credit cooperatives in July and August stoked concerns about the financial system.

Meanwhile, the yen was appreciating, at one point strengthening to the ¥79 level to the dollar.

Monetary easing was aimed at simultaneously correcting the strong yen to improve the earnings of exporters, stimulating the economy and disposing of nonperforming loans.

However, progress stalled on the nonperforming loans issue, causing Hokkaido Takushoku Bank and the former Yamaichi Securities to fail in 1997.

As prices remained flat, the government acknowledged in 2001 for the first time since World War II that the Japanese economy was deflationary.

The BOJ introduced its zero-interest-rate policy in 1999 and maintained ultralow rates thereafter.

Haruhiko Kuroda, who became BOJ governor in 2013, pursued aggressive monetary easing, culminating in the adoption of a negative interest rate policy in 2016.

China urged the Group of Seven to abide by market economy principles and international economic and trade rules and stop undermining the global trade order on Thursday, responding to the bloc’s latest joint statement that calls for reducing reliance on China for critical minerals and rare earths.

Foreign Ministry spokesman Lin Jian made the remarks at a regular press briefing. China’s position on safeguarding the stability and security of critical minerals and the global industrial and supply chains remains unchanged, Lin said. All parties share the responsibility to play a constructive role in this regard, he added.

He noted that China’s efforts to standardize and improve its export control system are consistent with internationally accepted practices and are intended to better safeguard world peace and regional stability and fulfill non-proliferation obligations.

“We urge the G7 to earnestly abide by market economy principles and international economic and trade rules, and stop using the rules of small exclusive circles to disrupt the international economic and trade order,” Lin said.

China urged the Group of Seven to abide by market economy principles and international economic and trade rules and stop undermining the global trade order on Thursday, responding to the bloc’s latest joint statement that calls for reducing reliance on China for critical minerals and rare earths.

Foreign Ministry spokesman Lin Jian made the remarks at a regular press briefing. China’s position on safeguarding the stability and security of critical minerals and the global industrial and supply chains remains unchanged, Lin said. All parties share the responsibility to play a constructive role in this regard, he added.

He noted that China’s efforts to standardize and improve its export control system are consistent with internationally accepted practices and are intended to better safeguard world peace and regional stability and fulfill non-proliferation obligations.

“We urge the G7 to earnestly abide by market economy principles and international economic and trade rules, and stop using the rules of small exclusive circles to disrupt the international economic and trade order,” Lin said.

Creating large banks which can operate across Europe is desirable for sustaining the continent’s financial system, the European Central Bank’s chief economist said Friday.

“Having a banking system that is too localised and, in turn, too intertwined with its domestic sovereign, is not a good recipe,” Philip Lane told a conference organised by French investment bank Natixis in Paris.

“From a macro point of view, it’s very important to have the risk sharing that comes from cross-border banking. That can be in terms of equity ownership, it can be in terms of funding, it can be in terms of common technology,” Lane added.

He was speaking as Italy’s second-largest bank, UniCredit, targets a hostile takeover of German rival Commerzbank, having launched a bid in May which expired Tuesday. The Italians’ longer-term aim is to merge Commerzbank with Germany’s HypoVereinsbank, owned by UniCredit.

The Milan-based bank made a bid valued at 35 billion euros ($40.6 billion) not just to take control of a rival in a fellow EU state but to cement its status as a European heavyweight.

Lane said if banks are unable to achieve mergers, they must seek other ways to reduce costs and risks in a period of rising fixed expenditure, amid the growing need for expensive cybersecurity systems.

Lane said he foresaw a relatively small number of giant banks in Europe and noted the arrival of purely digital banking players to the market, disrupting traditional banking models.

Established players must respond to this process by offering competitive products, embracing technological change along the way, he said.

The United States has started an investigation over “unfair” pharmaceutical pricing policies in Germany, a move that could lead to fresh tariffs.

US President Donald Trump’s administration has launched similar probes into dozens of trading partners over issues including forced labor and industrial overcapacity, leading to proposals of higher levies in some cases.

The US move on Thursday comes after the German government sought to overhaul its statutory health insurance system, including through lowering the prices public insurers pay for medicines, in a bid to rein in public spending.

The probe announced by the US Trade Representative’s office will determine if Germany’s “persistent underpayment for innovative pharmaceutical products” is “unreasonable or discriminatory and burdens or restricts US commerce”.

The move -- launched under Section 301 of the 1974 Trade Act -- came after the USTR pointed to evidence Germany has “unfair pricing” policies and practices.

Reduced revenue associated with such practices also appeared to contribute to reduced investment for research and development, among other issues, it added.

“As a result, the United States pays a disproportionate share of global R&D costs for innovative pharmaceuticals,” the notice said.

“President Trump has made clear that American patients should not be shouldering a disproportionate share of global pharmaceutical research and development,” US Trade Representative Jamieson Greer said in a statement.

He cited Germany’s plans to fast-track legislation “that would further reduce its spending on innovative pharmaceuticals.”

The US trade envoy’s office will next receive comments and hold a hearing in September as part of the investigation.

Germany’s health ministry confirmed ongoing talks with Washington on the issue.

“I assume the United States will honour the agreement we have in place. Reimbursements for modern, innovative medicines by our health insurance funds is a decision which falls within our national jurisdiction,” German Chancellor Friedrich Merz told reporters in Brussels on Friday.

Health Minister Nina Warken said earlier this week it would be tough for Germany to pay higher prices. “We have a tense financial situation in our health insurance system,” she said.

Germany’s VCI pharmaceutical industry federation said it took the US move “very seriously.”

“In an already tense trade policy environment, companies need reliability and planning certainty -- not a new source of disruption,” the group said in a statement to AFP.

Trump has rolled out sweeping tariffs since returning to the White House last year, though the US Supreme Court struck down many of them in February.

His administration has since turned to trade probes as officials look to reimpose more lasting duties.

This month, the USTR’s office proposed new tariffs of up to 12.5 percent on dozens of countries under its investigation into forced labor concerns.

Brent crude ticked higher on Friday, but stayed set for a weekly fall of around 8 percent, after Israel and Hezbollah agreed on a ceasefire in Lebanon but Iran set conditions for using the vital Strait of Hormuz.

Brent crude futures were up 66 cents, or 0.53 percent, at $80.38 a barrel by 1:30 p.m. ET, while US West Texas Intermediate crude was up 94 cents, or 1.23 percent, at $77.54 per barrel. Trading volumes were light due to a US federal holiday.

Gulf producers were preparing to raise exports after Israel and Hezbollah agreed to a ceasefire which began at 4 p.m. local time (1300 GMT) on Friday. At least four tankers carrying crude, oil products and liquefied petroleum gas entered the Strait of Hormuz on Friday, heading for Iraqi Gulf ports, MarineTraffic data showed.

Despite the uptick in activity, however, Iran signalled tighter control over shipping, with state TV reporting that vessels must coordinate transit with the Revolutionary Guards navy. In an undated advisory circulated to the maritime industry in the last 24 hours and seen by Reuters, Iran’s Persian Gulf Strait Authority said “no vessel is permitted to pass through the Strait of Hormuz without a valid passage permit issued by the PGSA”.

Concerns around Iran’s conditions for using the strait helped push oil prices higher on Friday, said Rory Johnston, founder of the Commodity Context newsletter. “The market was pricing in a deal and pretty seamless execution, and that doesn’t seem to be what we’re getting thus far,” Johnston said.

In spite of Friday’s gains, Brent was down about 8 percent week-over-week, reflecting a significant easing of supply concerns in the wake of the US-Iran deal to end the war. “Though (oil prices) haven’t got to the point to where they were before the war started, it looks like we’re headed in that direction,” said Phil Flynn, senior analyst with Price Futures Group, adding more supply is expected to flow in coming days.

“The backlog of ships can move quicker than some people think and if there’s cooperation between Iran and the US, it can move quite quickly,” Flynn added.

A planned meeting between Iranian and US officials in Switzerland on Friday has been postponed, with arrangements underway for talks in the coming days, Iran’s Foreign Ministry said on Friday. The ministry said the meeting was no longer urgent because a memorandum of understanding on ending the war had already been signed digitally between the two sides. Analysts expect the deal to release more than 85 million barrels of oil stranded in the Middle East Gulf into global markets. The agreement also includes the lifting of US sanctions on Iranian oil, which would add more supply.

Around 20 percent of global oil and LNG supply transits Hormuz, but recovery in flows and production after the US-Iran deal could take several months. Citi said its base case, with a 60 percent probability, sees sustained normalisation in flows, with oil markets moving into surplus and prices trending lower over the next six to 12 months to around $60 to $65 per barrel by the first quarter of 2027.

Commerzbank said oil supply should gradually recover, lowering its Brent forecast to $80 a barrel by year-end from $85, while expecting prices to remain above pre-war levels for most of the coming year.

Iraq’s oilfields are ready to resume production and output will gradually return to normal, restoring previous rates, Oil Minister Basim Mohammed said.

On the demand front, world demand will rise to 113.3 million bpd in 2030 from 105.1 million barrels per day in 2025, OPEC said in its 2026 World Oil Outlook.

The Indian rupee ended largely unchanged against the dollar after a choppy session on Friday, as weakness in regional currencies largely offset the unwinding of long dollar positions, but the currency posted its best week in the last 11 on debt inflows. This was also the fourth weekly gain in the last five weeks.

The rupee climbed to 94.21 early in the session as long dollar positions were unwound, but surrendered gains later as the dollar strengthened and index-rebalancing outflows hit the currency. It ended little changed at 94.32 per dollar.

For the week, the rupee rose 0.83 percent, marking its best performance since week ended April 3.

“The recent RBI measures together with favorable oil prices on account of de-escalation of Middle East concerns kept the local unit in positive territory even after sizeable dollar strength today,” said Dhaval Shah, founder and managing director, De-Risk Forex Consultancy. “This suggests the bias for rupee has changed and we continue with our previous forecast of 93.50.”

The rupee has been on a rising trend after the Reserve Bank of India announced dollar-attracting measures two weeks ago.

“RBI absorbing hedging cost to attract foreign currency deposits and support external borrowing with the concessional FX facility appear most effective in the near term to lend support to the rupee,” said Clifford Lau, hard- and local-currency portfolio manager on the emerging markets debt team at William Blair Investment Management.

Robust foreign inflows into Indian government securities and a slump in oil prices since then have also worked in favour of the local currency, but the one-way move was challenged by a resurgent dollar, an uptick in oil and renewed US rate-hike expectations on Friday.

The Fed’s latest policy meeting, the first under new Chair Kevin Warsh, revived expectations of further rate increases and drove the dollar index to a one-year high. Brent crude inched up after US Vice President JD Vance withdrew from a planned meeting with Iranian negotiators on Friday to begin discussions on implementing the 14-point agreement

Japan plans to set a target of about $2.3 trillion in combined public ​and private investment by 2040 across ‌17 strategic sectors as part of Prime Minister Sanae Takaichi’s new growth strategy, the Nikkei reported ​on Friday.

The 370 trillion yen investment ​initiative, to be unveiled as early as next week, will focus on areas such ​as AI, chips and space development, as ​Takaichi seeks to use government spending to spur private-sector investment, the business daily said, without citing a ​source for the information.

A call by Reuters ​to the Prime Minister’s Office on Saturday to seek ‌comment went unanswered outside business hours.

The government is considering creating a multi-year budget framework to ensure stable funding for investments deemed critical to ​economic security, ​some of ⁠which may be financed through bridging bonds.

Bridging bonds are used to ​cover temporary funding needs and are ​issued ⁠with guarantees on specific means to pay for redemption, allowing the heavily indebted government ⁠to ​argue that it is mindful ​of fiscal discipline even as it boosts spending.

Shipping traffic through the Strait of Hormuz rose to its busiest in two months after a deal to halt the US-Iran war, maritime trackers said on Friday.

A total of 25 commercial vessels crossed the newly reopened strait on Thursday, the highest number since mid-April, according to data from tracking firm AXSMarine -- more than three times the average of just over seven a day since early March.

In a sign of traffic picking up in the region, empty trucks queued for up to three kilometres (two miles) outside the UAE port of Korfakkan just south of the strait, as at least four container ships unloaded there, an eyewitness told AFP.

Other ships could be seen on the hazy horizon, apparently waiting their turn to dock and unload, the eyewitness said, requesting anonymity.

The spike came after Iran and the United States agreed this week to re-open the crucial route under an agreement to end the war, but before the postponement of talks between the sides in Switzerland that had been planned for Friday under that deal.

The number of crossings on Thursday may be higher, as some ships turned off or manipulated their AIS transponder signals to avoid detection, AXSMarine said in a news release.

Iranian forces effectively closed off the strait after US and Israeli strikes sparked the war on February 28. Maritime authorities reported dozens of attacks on ships in the area.

Global shipping groups warned this week that plans to resume traffic through the strait were still not clear and it was not thought safe to start exiting the Gulf.

The Pakistani navy published an alert Friday warning that a mine had been sighted in the strait off Oman. “All vessels transiting through the area are advised to navigate with extreme caution,” it said.

Iran’s Persian Gulf Strait Authority on Friday published new rules for transits during the 60-day period covered by the war agreement.

In a post on X it said all ships seeking to cross the Strait of Hormuz should submit a transit request “48 hours in advance”.

It said it would waive payments of “tariffs” and “Iranian insurances” for ships passing during the 60 days.

International Maritime Organization (IMO) chief Arsenio Dominguez said in April that the body was working on a plan to ensure safe transit for ships out of the Gulf. More than 500 commercial vessels and about 11,000 seafarers are still stuck in the Gulf, according to the IMO. It says 20,000 seafarers in the region have been affected by the war overall.

The agreement to stop the war this week was also meant to halt fighting in Lebanon but Israel’s military on Friday announced new strikes there.

A US official later said Israel and Iran-backed militia Hezbollah in Lebanon had agreed to a ceasefire.

The closure of the strait during the war drove up global oil prices and choked off shipments of energy and crucial commodities such as fertiliser.

Following the Iran-US agreement announced on June 14, “the first sign of relief came this week with fast falling prices”, said Ipek Ozkardeskaya, a senior analyst at banking group Swissquote.

“Energy and transport sectors will be the first to feel the relief, before it spills toward the rest of the economy,” she told AFP.

But given the risk of renewed fighting in Lebanon, she added, “questions remain regarding the US ability to end the war”.

China is stepping up scrutiny over exports of indium, leading some buyers to fear the niche metal, sought after for next-generation data centres, may be added to the export control regime that has become one of Beijing's most potent trade weapons.

China produces nearly 70% of the world's indium, a byproduct of zinc refining mostly used in displays and solder but also the raw material for making indium phosphide, used to make high-speed optical chips for AI data centres.

Beijing put indium phosphide on an export control list in February 2025 and the restrictions have become enough of a hurdle for next-generation data centres that the CEO of Nvidia-backed chipmaker Coherent travelled to Beijing with President Donald Trump in May to raise the issue.

While indium metal is not on the export control list, two buyers told Reuters about growing scrutiny over their purchases from Chinese customs. For the first time this year, a European buyer was asked to disclose information about end users, including where they were based.

A major buyer in North America said approvals had gone from same day to several days, which they attributed to more scrutiny of paperwork and described as "tense". This buyer had not been asked for extra information by customs.

China's Ministry of Commerce did not immediately respond to a request for comment on a public holiday.

All the buyers declined to be named owing to the sensitivity of the topic.

The extra due diligence is not uniform and two other buyers told Reuters they had heard of extra scrutiny but not faced it themselves. So far, Reuters has not identified any shipments that have been blocked.

Nonetheless there is some concern in the small industry that this is a prelude to tighter controls or the end-user disclosures which China, and other countries with export control regimes, use to chart global supply chains and chokepoints.

Indium has been identified as a potential vulnerability for the US, whose Defense Logistics Agency earlier this year released a request for proposals to stockpile up to 403 tonnes of the material over three years.

Another North American buyer said they suspected that the reporting requirements were "a precursor to restrictions or outright bans on exports."

Oil prices rose more than 1 percent Wednesday after US President Donald Trump threatened ‌to resume bombing Iran if it didn’t “behave”, but remained near three-month lows as the International Energy Agency warned of excess supply next year.

Brent crude futures were up 93 cents, or around 1.2 percent, to $79.89 a barrel at ​1308 GMT, and US West Texas Intermediate gained 79 cents, or 1 percent, to $76.84. Both ​contracts hit their lowest since early March earlier in the session.
Trump said on Wednesday that a memorandum of understanding with Iran was not final, and that he could ​resume a bombing campaign if he did not like it or if Iran didn’t “behave”.

“(There’s) still a ​bit of uncertainty in terms of the US situation ... so it ... makes sense for oil to bounce back from these levels after staging what has been quite a sharp decline in the last few days,” said Fawad ​Razaqzada, market analyst at City Index and FOREX.com.

IEA SAYS INVENTORIES TO BE RESTOCKED IN NEXT ​FEW MONTHS

In its first look at 2027, the IEA said the oil market will enter a significant supply overhang, ‌with global supply set to surge by 8 million barrels per day and demand rising by just 2 million bpd.

In the near term, the agency said the Iran-U.S. deal should provide an opportunity to replenish depleted inventories or build new strategic reserves.

“Markets may be underpricing the depth of ​the supply glut coming ​online,” said Crispus Nyaga, research analyst at Empire FX.

The MoU, not yet public, extends by another 60 days a tenuous ceasefire agreed in April, to allow room for talks ​between the US and Iran toward a permanent truce.

Still, industry officials ​say a full return to pre-war production and refining levels is likely to take weeks, months or even years.

US crude stocks fell 8.3 million barrels in the week ended June 12, market sources said, citing American Petroleum ⁠Institute data.

This ​exceeded expectations for a draw of 4.6 million barrels, ​with official numbers due from the Energy Information Administration at 10:30 a.m. ET (1430 GMT) on Wednesday.

The dollar held steady against most major peers on Wednesday ahead of the Federal Reserve’s first policy decision under chair Kevin Warsh, which could see some volatility as investors adjust to a new style of policy making and communication. The euro was flat on the day at $1.1605, while the pound softened a fraction on both the dollar, to $1.3420, and the euro, to 86.5 pence to the common currency, after cooler-than-expected UK inflation data that could give the Bank of England cover to hold off on raising rates this year.

But the big event of the day, the Fed meeting, is still to come, and left investors hesitant to take on large positions. The Fed is widely expected to stand pat at Warsh’s debut meeting. The statement, economic projections and news conference, however, will be scrutinised for any signals of the Fed dropping its easing bias as officials grow more hawkish on inflation risks.

“There have been many central banks meeting this month, but this is the one that’s overshadowing everything,” said Jane Foley, head of FX strategy at Rabobank. “There is a lot of uncertainty over what Warsh might signal. No one is expecting a change in interest rates, but is he going to try and downplay the dot plot? Try and set up a new framework? Try to steer them towards an easing bias?” she said.

The so-called “dot plot” shows policymakers’ expectations for the future path of interest rates. Warsh was appointed by US President Donald Trump, who repeatedly criticised the previous Fed chair, Jerome Powell, for being slow to cut rates. Money market pricing actually reflects around an 80 percent chance of the Fed hiking rates this year.

Before the US and Iran reached an interim agreement to end the war in the Middle East, economists had thought the Fed would signal some willingness to raise rates to try to limit the extent to which elevated energy costs spill over into broader inflation. Now though, oil is back below $80 a barrel and the Fed may give different signals.

Britain’s annual inflation rate was unchanged at 2.8 percent in May as higher petrol prices caused by the US-Iran war were offset by lower food costs, official data showed Wednesday.

The Consumer Prices Index level matched April’s reading, the Office for National Statistics (ONS) said, while an analysts’ consensus forecast had been for an increase to 3.0 percent.

“While the war in the Middle East pushes prices up globally, we have got the right economic plan and inflation has held steady,” finance minister Rachel Reeves said in response.

Even though the United States and Iran agreed this week to a deal to end the conflict, inflation could still rise in the coming months with energy costs remaining above pre-war levels.

The better-than-expected inflation data for May could meanwhile prove fruitless for the Labour government, which is facing a special vote Thursday expected to set in motion an attempt to oust Keir Starmer as prime minister.

Longtime Starmer critic Andy Burnham is hoping to win an election for a parliament seat in northwest England so that he can run for the Labour leadership, and the premiership.

The inflation data also comes before an interest rate decision by the Bank of England, which is expected to hold borrowing costs steady Thursday after energy prices tumbled in recent days thanks to the US-Iran deal.

Oil inventories held by OECD member countries fell in May to their lowest level since 1990 as governments drew down stocks to offset the blockage of Gulf crude shipments during the Middle East war, the International Energy Agency said Wednesday.

The drawdown since the start of the conflict has reached 163 million barrels in the Organisation for Economic Cooperation and Development club of wealthy countries, the IEA said in its monthly report.
“Despite the significant reductions in demand for crude oil and refined products, the buffers in the system continue to erode at a record pace,” the agency said.

To ease the burden from soaring oil prices due to Tehran’s effective closure of the Strait of Hormuz, the IEA organised coordinated stock releases of 400 million barrels to the global market, of which 252 million have been released as of June 12.

“The flow of emergency stocks is expected to decelerate somewhat in June and July,” the agency said, after a deal was announced this week to end the war that began on February 28 with US and Israeli strikes on Iran.

But the impact of high prices will weigh heavily on demand through this year, with an expected decline of 1.1 million barrels a day compared to 2025 levels.

“We see growth rebounding to 2 mb/d in 2027, as a normalisation of trade flows, lower oil prices and an improving economic outlook contribute to the recovery,” the IEA said.

QatarEnergy is ready to resume liquefied natural gas production ​at its Ras Laffan LNG plant very quickly ‌and could reach within a month full output of facilities unaffected by Iranian strikes, a person with knowledge of the matter told Reuters ​on Tuesday (16 June).

Two of Qatar's 14 LNG trains and ​one of its two gas-to-liquids (GTL) facilities were damaged in ⁠the strikes, which knocked out 17% of the country's ​LNG export capacity, and will take years to repair, the ​group's CEO told Reuters in March.

However, production at other facilities, idled because of the de facto closure of the Strait of Hormuz oil ​and LNG export gateway for the region during the Iran ​war, could be quickly restored, the source said.

"The problem will be how ‌fast ⁠can we bring ships in and how fast we can load them after the strait opens," the person, who declined to be named, told Reuters. "It's more of a shipping ​and logistics problem ​than production."

Despite ⁠a framework agreement between the US and Iran on terms to end their war and reopen ​Hormuz, a little more than a dozen LNG ​tankers ⁠have managed to exit the strait since the war began in late February.

Shippers are awaiting reassurance on safety to cross the ⁠strait, ​including the clearing of mines, which ​could delay a return to normal shipping traffic by weeks.

Myanmar’s inflation spiked to nearly 25 percent as shocks from the Middle East conflict compounded the effects of the country’s civil war, the World Bank said Tuesday.

The Bank also slashed its growth forecast for the financial year that started in April, citing “a less favorable external environment”.

Myanmar has been mired in civil war since the military snatched power in a 2021 coup, plunging it into a half-decade of instability and a backslide into poverty for many of its more than 50 million citizens.

The country also imports 90 percent of its fuel oil, according to official figures, leaving it highly exposed to closure of the Strait of Hormuz since the US-Iran war started on February 28.

That sent inflation to as high as 24.6 percent on-year in April, according to the Bank’s biannual Myanmar Economic Monitor report, which also saw officials cut their 2026-27 economic growth outlook to two percent, from three percent previously estimated.

Myanmar’s economy is “stabilising at low levels” the World Bank said, but “a renewed fuel shock magnifies longstanding structural weaknesses and leaves the outlook highly vulnerable to further disruption”.

“The fuel shock has reignited inflation pressures,” senior economist Kemoh Mansaray told reporters.

“What this means is household purchasing power has gone down, and these households were already facing very thin buffers with high poverty levels.”

Inflation for the 12 months to the end of March came in at 21.1 percent.

The Bank’s report also said 2025 poverty levels hit 29.9 percent -- “still far above pre-2021 trends”.

“Because we’re struggling just to afford food, there are children we can’t send to school,” said one 28-year-old father in Yangon, speaking on condition of anonymity for security reasons.

“We have three school-age children at home,” he said.

A female Yangon shopkeeper -- also speaking anonymously -- complained soaring prices had crippled her business and family.

“Our income and expenses don’t match. We just manage day by day,” added the 45-year-old.

“Prices only go up, they never go down,” she said. “Now no matter how much we earn, it’s still not enough.”

The closure of the Strait of Hormuz has been particularly damaging to Asia, where 80 percent of oil transiting the seaway is bound, according to the International Energy Agency.

US President Donald Trump said Monday ships were again sailing through the strait after Washington and Tehran announced a deal to end the war, and claimed the oil route would be “completely open” by Friday.

However analysts warn economic recovery from the conflict will be a long process.

Oil prices slid to fresh three-month lows on Tuesday as markets weighed prospects for a resumption of supplies through the Strait of Hormuz alongside weaker physical demand and scant details on a preliminary deal to end the Iran war.

Brent crude futures were down $1.44, or 1.7 percent, at $81.73 a barrel, the lowest since March 10, at 0906 GMT.

US West Texas Intermediate was down $1.55, or 1.9 percent, at $79.20 a barrel, also the lowest since March 10. Oil prices had already dropped nearly 5 percent on Monday to their lowest close since March 4 after US President Donald Trump said a memorandum of understanding had been signed to end the US-Israeli war with Iran, though full details have not been released. Iranian Foreign Minister Abbas Araghchi said on Tuesday Iran and the US would start a new round of talks in Switzerland on Friday to reach a final agreement after the start of an interim deal. He warned that any Israeli attack on Lebanon or continued presence on Lebanese territory would breach the interim agreement.

INVESTORS EYE STRAIT REOPENING

The conflict led to the closure of the Strait of Hormuz, which typically carries about one-fifth of global oil supplies. Some analysts expect flows through the strait to resume soon, adding to downward pressure from already soft physical markets. Goldman Sachs lowered its fourth-quarter Brent forecast to $80 a barrel from $90 and cut its 2027 average estimate to $75 from $80, saying it now assumes Gulf exports return to pre-war levels by the end of July rather than late August. A range of indicators has pointed to weakening physical oil markets in recent weeks, Morgan Stanley analysts said in a client note. China’s crude imports slumped 29 percent in May to their lowest in eight years, extending a sharp decline for the world’s largest importer, with shipments of Saudi crude also expected to fall in July. Early indications suggest the US-Iran deal would reopen the blockaded Strait of Hormuz and extend a ceasefire for 60 days, buying time for negotiations on issues including Iran’s nuclear programme.

But with details still unclear and a permanent truce yet to be secured, analysts say volatility risks remain. Suvro Sarkar, the head of DBS Bank’s energy research, said the deal’s first phase - encompassing the Geneva signing of the ceasefire extension - was easy. The second phase - the reopening of the Strait of Hormuz and winding down the US naval blockade on Iranian ports and vessels - would be watched closely by markets, he added. “Anything other than a clean simultaneous unlock will mean renewed volatility in oil prices,” Sarkar said. “Given the trust deficit so far, it will be interesting to see how this plays out over the next couple of weeks.”

The Bank of Japan lifted its key policy rate to a 31-year high of 1.0 percent on Tuesday, warning of the risk of heightening inflation risks stemming from elevated crude oil prices due to the Middle East conflict and the weak yen.

The central bank, in the absence of Governor Kazuo Ueda who has been hospitalized for medical treatment, raised the short-term interest rate from 0.75 percent in its first hike since December, saying that the recent U.S.-Iran agreement to end the war is a positive development but still leaves uncertainties over the economy. The bank’s rate hike after keeping it steady at the three previous meetings brings its policy back on a normalization track after a decade of unorthodox easing that ended in March 2024.

The BOJ said in its statement that there is a risk of underlying inflation rising above its target of 2 percent as rises in crude oil prices lead companies to hike prices in business-to-business transactions “at a relatively fast pace,” which could “spread to an increase in consumer prices across a wide range of items.”

BOJ Deputy Governor Shinichi Uchida told a post-meeting press conference that the bank will continue to raise the rate to stabilize inflation at around the 2 percent target, judging that even after the latest hike financial conditions remain accommodative.

Uchida said that one of the major reasons behind the rate hike decision is reduced risks to the economy due to factors such as government measures to secure alternative sources of raw materials including imports of oil from regions other than the Middle East.

Uchida also said that the bank is watching currency moves carefully. On Tuesday afternoon in Tokyo, the U.S. dollar was trading above the 160 yen line, the level where the Japanese financial authorities intervened in the currency market just over a month ago to support the yen.

“We do not target specific exchange rates in guiding our monetary policy, but we engage in policy discussions on the view that currency moves have a crucial impact on economic and price developments,” he said.

Among the remaining eight policymakers excluding Ueda who discussed the policy change, the rate hike decision was opposed by Toichiro Asada, who joined the Policy Board in April and is viewed by the market as a proponent of reflationary policies and in favor of aggressive monetary easing.

In another policy change, the bank said it will pause the plan to reduce Japanese government bond purchases from the next fiscal year starting in April, at a time when long-term interest rates have been rising rapidly.

It will keep the current pace of reducing monthly purchases by about 200 billion yen every quarter for rest of this fiscal year, which would result in buying of around 2.1 trillion yen ($13 billion) per month in the last quarter of fiscal 2026.

But from April 2027 onwards, the bank will no longer reduce but steadily buy about 2 trillion yen a month under the new plan, citing the need to stabilize the bond market.

The BOJ decided in July 2024 to cut back its monthly government bond purchases as part of its efforts to normalize its monetary policy.

While raising the key policy rate could cool the economy by increasing borrowing costs for companies, restraining investment and dampening private spending, the central bank saw the need to respond to inflation risks following the launch of U.S.-Israeli attacks on Iran in late February and subsequent surges in crude oil prices.

The yen repeatedly falling to the 160 zone against the dollar, despite the Japanese authorities intervening in the currency market from late April to early May to curb the unit’s fall, has also stoked concerns about rising import costs for resource-poor Japan.

Even if the U.S.-Iran conflict ends following the two countries’ agreement to end the monthslong war, shipping through the Strait of Hormuz may not immediately stabilize, keeping transport, raw material and other costs elevated, analysts said.

But the agreement will relieve fears of disruptions in Japan’s supply chains, serving to reinforce the view that the economy is resilient enough to withstand further rate hikes, they said.

The decision to raise the rate puts the BOJ in line with other central banks shifting toward tightening of monetary policy amid inflationary pressures, such as the European Central Bank, which hiked its rate last week.

The two-day policy meeting was chaired by BOJ Deputy Governor Ryozo Himino, after Ueda was hospitalized to treat a hepatic cyst infection. Ueda’s hospitalization is “short and there will be no significant impact” on the BOJ’s steering of monetary policy, Uchida said.

Inflation risks have been flagged after Japan’s wholesale prices rose 6.3 percent in May compared to a year earlier -- the biggest increase in over three years. Firms are increasingly passing on rising costs from the war in Iran to the prices of their goods and services.

The data suggested that core consumer inflation may also accelerate, although it has been kept below the bank’s 2 percent target because of government subsidies for electricity, gas and gasoline, the analysts said.

Never bet against Donald Trump? The oil market appears to have made a risky wager from day one of the Iran war: The US president would not allow the conflict to spiral into a full-blown economic crisis. So traders wouldn’t price one in, no matter what was happening with physical supplies. It was a risky call, but it proved correct.

Oil prices certainly swung during the three-and-a-half-month war, as Iran’s key weapon was the unprecedented closure of the Strait of Hormuz. Tehran was able to choke off a fifth of the world’s oil and liquefied natural gas supplies overnight, gaining significant leverage.

Benchmark Brent crude surged from around $70 a barrel before the war to a peak of $118 in late March, before sliding back to $83 after Washington and Tehran announced a preliminary deal on Sunday. Given that the supply disruption was one of the largest in modern history, these moves were remarkably restrained. Consider that oil prices surged to $123 a barrel in the aftermath of Russia’s full-scale invasion of Ukraine in February 2022. This reflected market fears about the partial disruption of Moscow’s oil exports, which had totalled around 7.5 million barrels per day (bpd) the previous year. That is around half the effective volume lost during the Hormuz blockade. For decades, a Hormuz shutdown has been treated as the ultimate doomsday scenario for oil markets. Yet when it finally happened, prices jumped, but they didn’t spiral.

BEND, DON’T BREAK

On the surface, the explanation is straightforward: the physical market did its job. The global energy system displayed extraordinary flexibility and resilience. Governments and companies released hundreds of millions of barrels from commercial and strategic stockpiles. Luckily for them, production had been running hot heading into the conflict, with inventories rising quickly, which helped cushion the blow.

Demand also adjusted. Once the war broke out, Chinese imports weakened sharply, and across much of Asia, governments imposed consumption curbs to dampen energy use. That helped prevent a deeper economic shock. The system bent, but it didn’t break. But that is only half the story, and arguably not the most important half.

TRUMP PUT

Look more closely, and the market’s response to the drawdown in global inventories tells a different tale. Stocks were depleted at an unprecedented pace during the war, falling at an average rate of 5.3 million bpd between March and May, according to the US Energy Information Administration. They were nearing dangerously low levels just as the northern hemisphere was entering peak summer demand. That should have been a flashing red warning sign. Instead, it appeared to reinforce confidence that a deal was near.

What explains this? The implicit bet was clear: Trump would not let the situation deteriorate to a point where US gasoline prices would surge to unmanageable levels and risk reigniting broader inflation, especially with midterm elections looming. Put simply, investors believed he would blink before the market cracked.

So the lower inventories fell, the closer a deal seemed. This pattern should be familiar. During Trump’s second term, markets have repeatedly learned to discount the most extreme outcomes implied by his rhetoric and initial policy moves, whether sky-high tariffs announced on “Liberation Day,” attacks on Federal Reserve independence, or threats to take over Greenland. His most aggressive moves have invariably been followed by retreats once financial markets began to wobble. The so-called “Trump put” is no longer just about equities, however. During the Iran war, it shaped commodity markets as well. Markets weren’t ignoring the risks. They were pricing in Trump’s limits.

YOU CAN ONLY GO SO FAR

But the oil market’s “Trump trade” has boundaries. Unlike equities, which can be buoyed by sentiment for extended periods, commodity markets are ultimately anchored in physical reality. And reality was catching up with the president – and energy traders. Despite the market’s remarkably effective response to the Hormuz shock, the loss of around 1.4 billion barrels of supply since the start of the war still punched a vast hole in global inventories. That gap has not disappeared. Yet the deal announcement has dramatically reduced the risk of a massive spike in oil prices – a warning that was sounded only two weeks ago. The challenge now is that supply and demand are unlikely to recover in step, pointing to a period of volatility.

On the one hand, demand could spike. Refiners, traders and governments that drained inventories during the crisis will have to refill them. That will create a new wave of demand that could tighten markets as summer demand peaks and supply buffers remain thin. The strain is already visible in the United States. After pushing exports to record levels during the crisis, US crude inventories have fallen to their lowest since 2004, while gasoline stocks are at their lowest since 2014.

On the other hand, supply could recover faster than many anticipate as revenue-starved Gulf producers scramble to regain market share. This could ultimately lead to a bigger price drop than traders are currently pricing in.

TRADING THE TRUMP

Throughout the war, Trump’s jawboning of oil markets was effective, repeatedly boosting investor expectations for a quick resolution even as conditions on the ground deteriorated. The US-Iran deal announced on Sunday was vague and offered limited gains for Washington. But it arrived just as the market was running out of room. Its timing was probably not a coincidence. Investors understood that Trump’s tolerance for market pain had limits, and those limits mattered as much as pipelines, tankers and storage tanks. They bet on it. This time, they were right.

International oil prices have fallen sharply amid signs of easing tensions between the United States and Iran, but consumers in Bangladesh are unlikely to see immediate relief at the pump as the government continues prioritising the recovery of subsidy costs accumulated during recent market volatility.

The international benchmark Brent crude, which is used to price refined petroleum products, stood at around $72.48 per barrel on 27 February, just before the Iran conflict escalated. It surged during the conflict, reaching a peak of $112 per barrel on 18 May – an increase of 54.5% from pre-war levels.

Since then, prices have retreated sharply. Brent was trading at $83.19 per barrel yesterday (15 June), down 4.74% in a single session amid reports of progress in potential US-Iran negotiations. The benchmark has now fallen 25.7% from its May peak, though it remains 14.8% higher than pre-conflict levels.

Despite the correction in global markets, Energy Division officials say domestic fuel prices are unlikely to be reduced in the near term.

"Oil prices are falling in the international market but are still higher than the pre-war level, which continues to require substantial subsidy support for diesel," said Monir Hossain Chowdhury, Joint Secretary (Operations Wing) of the Energy Division. He added that diesel still requires a subsidy of about Tk50 per litre.

"We are monitoring the global fuel market closely. Future decisions on price adjustments will depend on market movements, as discussions on the Iran issue are still ongoing," he said.

Officials estimate that fuel subsidies in FY2025-26 could reach around Tk5,000 crore, largely to keep diesel prices below cost. Petrol, octane and other petroleum products are currently priced largely in line with international markets and do not require subsidy support.

Middle Eastern crude benchmarks see steeper decline

The decline has been steeper in Middle Eastern crude benchmarks used for Asian pricing.
Murban crude, produced in the United Arab Emirates, fell from $110.04 per barrel on 18 May to $77.31 yesterday, a 29.7% drop.

Arab Light crude, used by Bangladesh Petroleum Corporation for refining at Eastern Refinery, declined from $119.09 to $87.75 over the same period, down 26.3%.

Prices were raised as global oil surged

Domestic fuel prices were previously raised on 18 April, when global markets spiked amid fears of supply disruption following the US-Israeli attack on Iran. At that time, Brent crude closed at $91.87 per barrel – already 26.8% higher than the pre-war level.

Diesel was increased to Tk115 per litre from Tk100, octane to Tk140 from Tk120, petrol to Tk135 from Tk116, and kerosene to Tk130 from Tk112. A second adjustment on 31 May added Tk5 per litre to octane, petrol and kerosene, taking them to Tk145, Tk140 and Tk135 respectively.

Energy expert M Tamim said declines in global prices do not always translate into lower transport or commodity costs domestically. "Price reductions during downward cycles rarely reach consumers, as bus fares and freight charges do not adjust accordingly. That is why there is limited pressure to reduce fuel prices," he said.

He added that stronger monitoring in the transport sector would be needed to ensure that any future reductions in fuel prices benefit consumers.