Good morning and welcome back. In today’s newsletter:
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Higher oil prices spark market sell-off
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German chancellor’s party heads for narrow defeat in key election
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Vontobel bank warns Switzerland to avoid ‘over-regulation’
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Iran’s oil lifeline that Donald Trump has left untouched
We begin with equity markets, which have been hammered as oil prices soared past $110 a barrel amid the Iran war.
What to know: Brent, the international benchmark, leapt above 25 per cent in Asia trading today to $116.38 a barrel, breaking through the $100-a-barrel threshold for the first time in four years, as traders bet that a widening Middle East conflict would lead to supply disruptions lasting weeks.
Shares fell across Asia today as investors reacted to the surge in oil prices. Japan’s Topix and South Korea’s Kospi slid 5.4 per cent and 8.2 per cent, respectively. Hong Kong and mainland China indices also fell.
US President Donald Trump dismissed the surge in oil prices as a “very small price to pay” in a social media post yesterday.
G7 finance ministers will discuss a possible joint release of petroleum from reserves co-ordinated by the International Energy Agency, in an emergency meeting today.
The latest on the conflict: Israel said it had begun “waves of strikes” on infrastructure in central Iran and Lebanon, shortly after senior clerics in Iran named Mojtaba Khamenei to replace his slain father as the Islamic republic’s new supreme leader.
Meanwhile, Trump’s openness to deploying troops inside Iran has raised concerns about deeper US involvement in the war. He told ABC News yesterday that he had not ruled out sending in special forces to seize Iran’s enriched uranium. “Everything is on the table,” said Trump. Follow our live blog for further developments.
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Geoeconomic effects: Markets are suggesting the ramifications from the Iran war are likely to persist and spread, writes Rana Foroohar.
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Air travel: Oman’s Muscat airport has told private jet operators to avoid using the site, giving priority to government and commercial flights amid airspace closures.
Here’s what else we’re keeping tabs on today:
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EU: Eurozone finance ministers meet in Brussels.
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UK: The 250th anniversary of the publication of Adam Smith’s An Inquiry into the Nature and Causes of the Wealth of Nations is commemorated.
Five more top stories
1. German Chancellor Friedrich Merz’s Christian Democrats look like they will finish second in key state elections in Baden-Württemberg, after projections showed the ruling Greens with a narrow lead. Meanwhile, Alternative for Germany is projected to nearly double its vote share.
2. Vontobel, one of Switzerland’s larger listed banks and asset managers, has warned Bern must avoid “over-regulation” as the government prepares to unveil sweeping reforms to its too-big-to-fail regime in the wake of Credit Suisse’s collapse. Read remarks from the Swiss group’s co-CEO.
3. Exclusive: German industrial giants such as BMW and Rheinmetall are pushing for a Japanese-style trading house to secure supplies of critical raw materials in a bid to bypass China’s stranglehold on rare earths.
4. Exclusive: Nigel Farage did not meet Trump when he travelled to the US president’s Mar-a-Lago residence on Friday, as people close to the Reform UK leader say the relationship between the two populist politicians has cooled since 2024. Read the full story.
5. Exclusive: Assured Guaranty, the UK water sector’s largest backer, has refused to insure financing efforts by any of the country’s utilities for more than a year, during which the sustainability of the heavily indebted sector has been called into question.
News in-depth
Kharg Island in the northern Gulf is one of Iran’s most sensitive targets and one of the easiest to hit. But so far it has remained unscathed by US and Israeli bombing. How Washington deals with the crucial export hub could give hints on its longer-term strategy towards the Islamic republic.
We’re also reading . . .
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Too radical for Britain?: The Green Party’s recent by-election win has led to fresh calls for greater scrutiny of its policies.
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In a buzz: Tech groups such as drone maker Quantum are winning investor support in Europe, boosting the region’s venture capital industry, writes Patrick Jenkins.
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End of poverty in China?: The country has lifted 700mn people out of indigence, but some doubt President Xi Jinping’s claim that the mission is complete.
Chart of the day
Trump’s attack on Iran will hit European and Asian economies harder than the US, which will be cushioned from some of the effects by its large domestic energy sector, analysts say.
Take a break from the news . . .
We might prefer the ease and speed of the self-service checkout, but Pilita Clark argues that it’s time to end the grim march of the touchscreen.
