Asian shares showed little movement on August 17, as investors remained cautious about rising oil prices linked to the ongoing conflict in Iran. The MSCI’s broadest index of Asia-Pacific shares outside Japan was flat, while Japan’s Nikkei index rose 0.4%. Australia’s resource-heavy shares declined by 0.3%, and South Korea's markets were closed for a public holiday.
Key Details
Oil prices have seen significant gains recently, with Brent crude holding steady at $88.50 per barrel after a 6% increase last week. U.S. crude slipped 0.3% to $82.12 per barrel, following a rise of 5.4% in the previous week. Analysts, including Shane Oliver, chief economist at AMP, noted that the lack of resolution in the Iran conflict is likely to keep inflation risks elevated. He stated, "While there is still no resolution to the Iran/Hormuz impasse, our base case remains that oil prices will stay in a $70 to $100 range."
Background
The ongoing conflict has disrupted oil tanker traffic through the strategic Strait of Hormuz, with oil flows from the Middle East down by 10 to 15% from normal levels. U.S. President Donald Trump has urged Americans to prepare for higher petrol prices as the conflict persists. Meanwhile, Iran has called on the U.S. to acknowledge its defeat in the conflict, further complicating the situation.
Related coverage: China’s Inflation Slows as Oil Prices Retreat Amid Conflict.
Elevated oil prices could lead to increased costs for consumers and businesses, particularly in the energy sector. This situation may also impact inflation rates across various economies. Investors will watch for the upcoming release of China’s activity data, which could provide insights into the broader economic implications of the ongoing conflict.
Based on reporting by: businesstimes.com.sg