Daily update
Daily update
- Investors have two related problems in pricing risks around the Gulf war. US objectives remain unclear, making it impossible to measure progress (and thus the likely length of the war). Statements from top US administration officials give different and at times contradictory assessments of the war; in the absence of measurable objectives, this is all markets have to respond to. The result is volatility.
- US President Trump set a deadline for reopening the Strait of Hormuz (this evening, US time), which Iran has categorically rejected. Trump threatened Iranian power plants, and Iran threatened desalination plants in the region and financial institutions related to the US. Attacking desalination plants could have very serious consequences. Markets are likely to remain volatile.
- France’s far right failed to win major cities in the mayoral elections, but did perform better in smaller cities (especially in the south). The results will not move markets (war risks dominate), but will inform investors’ thinking on longer-term risks, with the French presidential election next year.
- The Gulf war is disrupting fertilizer supply, threatening higher agricultural prices. However, the UN weather agency highlighted the increase in global temperatures which may be made worse by an El Nino weather pattern this year. That could be more disruptive to agricultural prices.