David Forrester, senior strategist at Credit Agricole in Singapore, noted the dollar has already moved above all major moving averages, with the next level to watch at 93 for the rupee.
Household Energy Bills at Risk
The Resolution Foundation warned that persistent oil and gas price rises could add £500 to household energy bills later this year. This comes despite Ofgem lowering the energy price cap by £117, equivalent to seven per cent, following recent government policy changes.
Rabobank analysts expect higher oil prices will «feed through quickly» into UK inflation. The Dutch bank does not foresee further interest rate cuts this year.
Investor Playbook
Traders are applying lessons from Russia’s 2022 invasion of Ukraine to navigate the current crisis. Jordan Rochester, head of fixed income, currencies and commodities strategy at Mizuho Bank in London, told clients: «I can’t be any clearer, use the 2022 playbook.» He added: «This is a logistics crisis as much as it is a war — a terms of trade shock with 20% of global energy supply unable to leave the region, even if temporarily.»
Matthew Haupt, hedge fund manager at Wilson Asset Management, said: «We’re seeing pure liquidation — to an extent even safe havens are not safe. The current playbook is similar to what we saw during Ukraine, but this time it’s about oil and it risks getting a lot bigger.»
Some analysts remain cautious about drawing direct parallels. Erik Nelson, a macro strategist at Wells Fargo, argued: «The scale of the current energy shock now versus 2022 is barely even comparable.»
Government Response
Chancellor Rachel Reeves met with executives from North Sea oil giants BP, TotalEnergies and Serica on Wednesday to discuss price volatility. A government source confirmed: «The Chancellor was clear with industry that she wants the energy profits levy to come to an end. She has made that promise and she stands by it. Indeed, it was a commitment she wanted to make this week. But the crisis in the Middle East has had real-time consequences on oil and gas prices and it is right that we respond to this.»
Reports emerged Wednesday that Iranian officials had reached out to the CIA with an offer to talk, providing brief relief to markets. But US officials remain skeptical of the approach. ING economist James Smith noted a «distinct possibility» of an interest rate cut this month only if Middle East tensions «rapidly de-escalate.»
Russ Mould, investment director for AJ Bell, cautioned: «The waters remain choppy. Wall Street has been oscillating between healthy gains and more modest moves higher, which hints at continuing nervousness about the outlook amid what remains a fast-moving set of events in the Middle East.»
Note: This article was created with Artificial Intelligence (AI).