Εβδομαδιαία Επισκόπηση: Διεθνής Οικονομία & Αγορές, 14/07/26
A serious re-escalation of the Middle East conflict could jeopardize risk appetite, with oil prices back to $85 per barrel
Renewed military hostilities in Iran has cast a shadow of uncertainty on the continuity of progress towards a normalization of naval flows in the region, in turn leading to a significant rebound for oil prices. Brent prices were moving past $85/barrel on July 14th, c. +18% versus early in the past week (+20% vs prior to the war).
Recall that global oil supply had rebounded by 4.1 million barrels per day (“mb/d”) to 98.8 mb/d in June according to the International Energy Agency (IEA), as a resumption of flows through the Strait of Hormuz has supported a partial recovery of production in the Persian Gulf region. Having said that, world output was still circa 9.5 mb/d below pre-war levels.
Total Gulf oil exports posted a monthly surge by 6.5 mb/d in June to 16.1 mb/d albeit still well below the 24 mb/d average before the war. Gulf production rose by 3.5 mb/d mom, with a drawdown of (previously obstructed from being shipped) floating storage and onshore inventories accounting for the rest of the rise in exports.
The latest developments induce fresh uncertainty on the path of consumer inflation, after early signs of easing in June on both sides of the Atlantic. In the event, the annual growth of the headline US CPI was +3.5% in June (below expectations of +3.8% yoy) from +4.2% yoy in May. The deceleration was broad based, with core CPI increasing by +2.6% yoy in June (0% mom versus expectations of +0.2% mom) down from +2.9% yoy in May. Following the below expectations US CPI outcome, short-term yields declined by circa -10 bps to 4.18%.
Uncertainty vis-à-vis inflation had previously led government bond yields higher by c. +15 bps (US Treasury 10-year: 4.61%, Germany’s Bund 10-year: 3.07% as of July 13th), as investors brought forward by c. three months their pricing for the next hike in policy interest rates in the US and the euro area (towards September and December 2026, respectively), with the respective curve of expectations moving up by close to +20 bps.
Japanese government bonds were an exception, with the 10-year at 2.79% and with a -12 bps on Friday July 10th, after the Finance Minister of Japan cited that the government will encourage the Government Pension Investment Fund (GPIF), the world’s largest in terms of assets (¥293.6 trillion or 44% of Japanese nominal GDP), to increase its investment allocation in domestic financial assets. GPIF invests roughly a quarter of its assets in domestic bonds, with equivalent shares in domestic equities, in foreign bonds and in foreign equities. The possibility of more investments in domestic assets also supported modestly the Yen (+0.3% against the US Dollar on Friday, albeit still hovering at 40-year lows of $/¥162).
Equity market indices have edged lower due to the recent flare-up of hostilities, with attention turning to the corporate results season for Q2:2026 which enters full speed in the current week with major Financials reporting. According to consensus analysts’ estimates, Financials will post a robust annual growth of Earnings-Per-Share (EPS) of +9% on a weighted basis, boosted mainly by investment banking and trading fees (the SpaceX IPO alone is estimated to have generated as much as $0.5 billion in fees for the Banks involved) as well as robust loan growth, at +7% yoy for all loans & leases, taking into account all commercial Banks.
Renewed military hostilities in Iran has cast a shadow of uncertainty on the continuity of progress towards a normalization of naval flows in the region, in turn leading to a significant rebound for oil prices. Brent prices were moving past $85/barrel on July 14th, c. +18% versus early in the past week (+20% vs prior to the war).
Recall that global oil supply had rebounded by 4.1 million barrels per day (“mb/d”) to 98.8 mb/d in June according to the International Energy Agency (IEA), as a resumption of flows through the Strait of Hormuz has supported a partial recovery of production in the Persian Gulf region. Having said that, world output was still circa 9.5 mb/d below pre-war levels.
Total Gulf oil exports posted a monthly surge by 6.5 mb/d in June to 16.1 mb/d albeit still well below the 24 mb/d average before the war. Gulf production rose by 3.5 mb/d mom, with a drawdown of (previously obstructed from being shipped) floating storage and onshore inventories accounting for the rest of the rise in exports.
The latest developments induce fresh uncertainty on the path of consumer inflation, after early signs of easing in June on both sides of the Atlantic. In the event, the annual growth of the headline US CPI was +3.5% in June (below expectations of +3.8% yoy) from +4.2% yoy in May. The deceleration was broad based, with core CPI increasing by +2.6% yoy in June (0% mom versus expectations of +0.2% mom) down from +2.9% yoy in May. Following the below expectations US CPI outcome, short-term yields declined by circa -10 bps to 4.18%.
Uncertainty vis-à-vis inflation had previously led government bond yields higher by c. +15 bps (US Treasury 10-year: 4.61%, Germany’s Bund 10-year: 3.07% as of July 13th), as investors brought forward by c. three months their pricing for the next hike in policy interest rates in the US and the euro area (towards September and December 2026, respectively), with the respective curve of expectations moving up by close to +20 bps.
Japanese government bonds were an exception, with the 10-year at 2.79% and with a -12 bps on Friday July 10th, after the Finance Minister of Japan cited that the government will encourage the Government Pension Investment Fund (GPIF), the world’s largest in terms of assets (¥293.6 trillion or 44% of Japanese nominal GDP), to increase its investment allocation in domestic financial assets. GPIF invests roughly a quarter of its assets in domestic bonds, with equivalent shares in domestic equities, in foreign bonds and in foreign equities. The possibility of more investments in domestic assets also supported modestly the Yen (+0.3% against the US Dollar on Friday, albeit still hovering at 40-year lows of $/¥162).
Equity market indices have edged lower due to the recent flare-up of hostilities, with attention turning to the corporate results season for Q2:2026 which enters full speed in the current week with major Financials reporting. According to consensus analysts’ estimates, Financials will post a robust annual growth of Earnings-Per-Share (EPS) of +9% on a weighted basis, boosted mainly by investment banking and trading fees (the SpaceX IPO alone is estimated to have generated as much as $0.5 billion in fees for the Banks involved) as well as robust loan growth, at +7% yoy for all loans & leases, taking into account all commercial Banks.