Metrobank’s US-Iran Risk Index settled at 142.5 on May 15th, 2.2% higher than the prior trading day.
Oil prices continued to rise, as the stalled US-Iran talks left market players with little hope for the Strait of Hormuz's swift reopening. This comes after US President Donald Trump’s Beijing trip last week, where he discussed the need to open the strait with Chinese President Xi Jinping, according to Reuters. Brent Crude closed higher at USD 109 per barrel on Friday, UK trading, according to data compiled by Bloomberg.
Meanwhile, the benchmark 10-year US Treasury yield rose by more than 11 basis points on Friday, US trading, as accelerating inflation data weighed on yields. According to Reuters, the 10-year note posted its highest yield in nearly a year last week.
The US dollar index gained on safe-haven flows. On the domestic side, corporate demand pushed the US dollar upward relative to the peso, leading to the dollar-peso exchange rate recording an all-time high close of 61.72 on Friday, Philippine time.
Over the weekend, Trump warned Iran that the “clock is ticking” for the two countries to agree to a peace deal, according to the BBC. With the threat of military escalation looming, risk levels will be tipped to the upside this week, as market players monitor developments in the war.
Metrobank still sees elevated risk and volatility in the near-term while a peace deal has not been struck. Oil prices are poised to stay high, as global supply remains constricted due to the war’s impact on Middle East oil facilities. Consequently, domestic inflation is expected to quicken in the coming months.
Moreover, Metrobank forecasts continued rate hikes by the Bangko Sentral ng Pilipinas (BSP) this year to stem accelerating inflation. 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.
