Metrobank’s US-Iran Risk Index settled at 120.9 on July 17, 3.7% higher than its value of 116.6 the day prior. This is the risk index’s highest reading in over a month, mirroring market risk levels prior to the initial Memorandum of Understanding proposed in June.
Global oil prices reached multi-week highs, as both the US and Iran intensified military attacks on key infrastructure in the Middle East, according to Reuters. Continued tensions along the Strait of Hormuz, a critical passage for global oil shipments, added pressure. Brent crude closed higher at USD 88 per barrel on Friday, UK trading, according to data compiled by Bloomberg.
While the benchmark 10-year US Treasury yield fell despite fresh attacks, the 2-year US Treasury yield rose, as market players maintained a more hawkish rate outlook for the US Federal Reserve (Fed) due to inflationary pressure.
Meanwhile, the US dollar preserved its strength, with the dollar-peso exchange rate closing Friday at 61.59 during Philippine trading.
Brent crude pushed past the USD 90-level per barrel on early Monday trading. With both the US and Iran signaling intensified military attacks, oil prices may further rise in the near term, fanning both inflation expectations and financial market risk levels.
Domestically, Metrobank sees still elevated inflation this year, pressuring Philippine bond yields and keeping the Bangko Sentral ng Pilipinas hawkish.
Finally, Metrobank forecasts the dollar-peso exchange rate to stay elevated amid a hawkish Fed and corporate demand.
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.
