Metrobank’s US-Iran Risk Index settled at 129.7 on April 20, 4.4% higher than the prior trading day.
Risk levels in financial markets rose in the immediate aftermath of the Strait of Hormuz’s closure and the US’s seizure of an Iranian vessel. Brent crude settled higher than last Friday’s close on Monday at USD 95.48 per barrel, according to data compiled by Bloomberg. The commodity remains under pressure, as the two-week ceasefire's end nears, adding further risks to Middle East oil supply should attacks resume. The benchmark 10-year US Treasury yield also rose on accompanying inflation expectations.
Meanwhile, the dollar index closed sideways on Monday, as investors weighed the current state of US-Iran relations. While tensions between the two countries are high, Reuters reported that Iran may consider another round of talks with the US. However, no plans have been made, with the US’s blockade of the strait remaining a hurdle toward talks taking place. Developments in the conflict's resolution will likely be the main driver for the dollar’s direction going forward, with safe-haven demand for the currency expected to climb if talks fail.
Metrobank still sees high risk and volatility in the near-term, as the path toward a resolution remains unclear. Oil prices are poised to stay high, as global supply remains constricted. Moreover, domestic inflation is expected to accelerate, as local energy prices stay high, which will likely compel the Bangko Sentral ng Pilipinas (BSP) to raise their policy interest rate this year. Finally, Metrobank expects the dollar-peso exchange rate to stay elevated, as dollar demand weighs on a weak peso.
Metrobank’s US-Iran Risk Index measures the amount of risk that the ongoing conflict presents to financial markets. It considers the general risk sentiment of investors and inflationary pressure brought by the conflict. A value of 100 denotes a normal level of risk based on market levels prior to the conflict’s escalation, while values greater than 100 imply increasing levels of risk.
