Military escalation in the Middle East has deepened the global energy crises. The US and Israel do not appear to be relenting, and kinetic escalation will only disrupt markets further. Oil and gas prices surged, particularly threatening those most exposed to a collapse in energy supplies, Europe and Asia. These continents do not have their own energy supplies so remain the most vulnerable. The energy crises will feed directly into inflation, and we see bond yields on the rise across Europe, threatening a far deeper recession. The US Dollar was steady to close out the week, with the EUR trading 1.1550, while the GBP holds above 1.3300.
Commodity currencies remain under pressure from the prospect of a global recession, with the NZD holding above 0.5800, while the AUD may struggle to hold 0.7000. This coming week will focus on the Middle East, energy prices and inflation.
