Metrobank’s US-Iran Risk Index settled at 140.0 on April 23, 3.2% higher than the prior trading day.
Tensions intensified on Thursday after the US seized another tanker carrying Iranian oil and US President Donald Trump ordered the US military to “shoot and kill any boat” laying mines along the Strait of Hormuz, according to NBC News. Global oil prices rose as a result, with Brent crude closing at USD 105 per barrel on Thursday, according to data compiled by Bloomberg.
These escalations also contributed to a stronger risk-off sentiment among financial market players, with the US dollar strengthening even further on safe haven flows. The benchmark 10-year US Treasury yield also rose by 2.4 basis points, as threatened oil supply continued to elevate inflation expectations.
There is still no news on when the US and Iran will resume negotiations. As inflation pressure mounts and tensions escalate, expect market players to remain risk-off for the time being.
Metrobank still sees high risk and volatility in the near-term, as the path toward a resolution remains uncertain. Oil prices are poised to stay high, as global supply remains constricted. Consequently, domestic inflation is expected to accelerate, on rising local energy prices.
Moreover, the Bangko Sentral ng Pilipinas (BSP) raised their policy interest rate on Thursday to 4.50% to address rapidly rising inflation expectations. Metrobank forecasts at least one more rate hike by the central bank this year as inflation breaches 4%. 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.
