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Oil prices spike more than 5% on Hormuz worries o Several countries push back against Trump’s demand for help to reopen waterway

HONG KONG: Oil prices surged more than 5% yesterday as several countries pushed back against Donald Trump’s demand that they help secure the key Strait of Hormuz, while Iran continued to target crude-producing neighbours. They recovered the previous day’s sharp losses that came after the head of the International Energy Agency (IEA) said more stockpiles could be tapped if needed. Still, most equities extended Monday’s gains as tech firms rallied after Nvidia said it expected to make at least US$1 trillion in revenue through the end of 2027. Investors are also awaiting a slew of central bank decisions this week that analysts say could see a resumption of interest rate hikes aimed at offsetting a possible spike in inflation caused by the surge in crude prices. Australia said yesterday it had lifted borrowing costs because of “sharply higher fuel prices”. Trump has called for allies in Europe and elsewhere to help reopen the Strait of Hormuz, which Iran has effectively closed, saying at the weekend that securing the waterway “should have always been a team effort, and now it will be”. But on Monday there was only a lukewarm response, with German Chancellor Friedrich Merz saying the war started by US-Israeli strikes on Iran was “not a matter for Nato”, while Britain, Spain, Poland, Greece and Sweden all distanced themselves from the calls. Australia and Japan also opted not to join. The US president told The Financial Times on Sunday that it would be “very bad for the future of Nato” if the allies refused to help, and said on Monday that he had asked to delay a summit with Chinese leader Xi Jinping by a “month or so” over the issue. With the crisis showing no sign of ending soon, both main crude contracts spiked. West Texas Intermediate and Brent each climbed more than 5% above US$100 a barrel before easing back slightly. They had dropped on Monday after IEA boss Fatih Birol flagged that member countries could unlock more oil from strategic stocks “if needed”, after already agreeing last week to a record release of 400 million barrels. Traders were also cheered by news from monitor Marine Traffic that a Pakistani oil tanker became the first non-Iranian tanker to transit Hormuz with its automatic transponder system activated. But attacks on Middle Eastern oil facilities continued. Qatar said it had intercepted missiles, though explosions were heard in Doha yesterday, while an “unknown projectile” hit a tanker off the coast of Oman. Meanwhile, Israel said it had launched a

Tank lorries are seen at an oil terminal in the Japanese city of Yokohama. – AFPPIC

Wall Street ended comfortably higher. However, Pepperstone head of research Chris Weston said: “Conviction behind a sustained rally in risk assets remains relatively low, although it is important to stay open minded to the possibility that momentum could build.” While the IEA comments and news of the tanker were welcomed, he warned that “it is difficult to view these developments as a definitive de-escalation or a true circuit breaker for the energy risk premium”. – AFP

Seoul, which had rocketed around 50% between the start of the year and the start of the war, led gains by rising more than 1%. Taipei, where chip titan TSMC is listed, was up a similar amount. Hong Kong, Sydney, Singapore, Taipei, Mumbai, Bangkok, Jakarta and Manila were also well up, though Tokyo and Shanghai dipped. London rose at the open but Paris and Frankfurt fell. That came after all three main indexes on

“wide-scale wave of strikes” in Tehran as well as attacks on Hezbollah in the Lebanese capital Beirut. Drones struck major oil fields in the United Arab Emirates and Iraq on Monday. And a drone and rocket attack targeted the US embassy in Baghdad early yesterday, a security official said. Equities continued to defy the spike in crude, with markets across Asia rising, helped by the remarks from Nvidia, which allowed investors some relief from events in the Middle East.

Indonesia weighs response to price pressures from Middle East war JAKARTA: Price pressures fuelled by the Middle East war may push Indonesia’s government to reconsider its dogged defence of energy subsidies and a costly meals scheme close to the heart of President Prabowo Subianto, analysts say. – and a dearth of new suppliers to offset the Middle East blockage, said Yose Rizal Damuri, executive director of Indonesia’s Centre for Strategic and International Studies. Indonesia, which produces about half the oil it consumes, heavily subsidises fuel, electricity and natural gas consumed domestically. According to Capital Economics, a London-based consultancy, the government allocated 381 trillion rupiah to energy subsidies for 2026, about 1.5% of GDP. Jakarta Composite Index of share values dropped to an eight-month low over concerns the cap would be raised if oil prices stay high.

But Capital Economics said a breach of the deficit cap “should create little concern” about Indonesia’s immediate fiscal health. “Government debt is low, at around 40% of GDP,“ it said in a statement. Last Friday, Prabowo took stock of the economic situation with his cabinet, stating: “We must now also take proactive measures, meaning we must conserve fuel.” “If some civil servants and officials do not need to come to the office, it would reduce traffic congestion and generate substantial savings,“ said the president. “We must also consider cutting working days.” The Fitch ratings agency this month downgraded Indonesia’s credit outlook to negative, citing “rising policy uncertainty”. The central bank insists growth prospects remain “solid” and says the country has sufficient foreign currency reserves. – AFP

He said the government may have no choice but to cut its fuel subsidy, which covers about 30% to 40% of the cost for consumers and represents around 15% of the budget. “The government can also consider making fiscal space by reducing ... the free meal programme,”Yose told AFP. The scheme, which consumes nearly a tenth of the annual budget, aims to feed millions of Indonesian schoolchildren and pregnant women in a bid to reduce stunting and boost the nation’s human capital, but has been criticised for logistical inefficiencies and food safety concerns. The meals programme was Prabowo’s most popular campaign promise, and he has repeatedly vowed to keep it in place. Yose said the government could save as much as 100 trillion rupiah (RM23 billion) by restricting the scheme to areas of the country where it is needed most.

Unlike many of its neighbours, Southeast Asia’s biggest economy has not seen long fuel queues as global oil prices have soared, nor have its citizens been subjected to pandemic-style work-from-home measures. But that may change. As Prabowo seeks to raise the economic growth rate from 5.1% last year to 8% by 2029, powered by high public spending, Jakarta has limited options for offsetting the impact of rising oil prices, according to experts. It can either cut fuel subsidies and risk political upheaval, slash spending on Prabowo’s signature school meals programme, or overshoot the fiscal deficit that is capped by law at 3% of GDP. “We are already in a critical situation,” with fuel and natural gas supplies at about three weeks’ worth – the maximum storage capacity

The figure was premised on oil costing US$70 per barrel (pb), but prices have topped US$100 pb since Israel and the United States attacked Iran last month, plunging the Middle East into war. Finance Minister Purbaya Yudhi Sadewa has said an oil price of US$92 pb would see Indonesia’s deficit rise to 3.6% of GDP. “If the budget really can’t handle it anymore, then there’s no other way than sharing the burden with the public to some extent,“ he told reporters. Past fuel price rises have led to riots. Yose said fuel price cuts were more likely than any decision in the near term to raise the fiscal deficit, which would require a change to the law or a presidential decree. Bloomberg reported on Monday that the