01/04/2026

BIZ & FINANCE WEDNESDAY | APR 1, 2026

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Oil, war top market worries for Q2 LONDON: Battered financial markets enter the second quarter significantly exposed to war headlines, a backdrop that could prompt a bigger retreat for equity markets while a hefty selloff in bonds could tempt buyers back. o Global growth outlook deteriorates as energy shocks ripple through major economies In bond markets, where prices have tumbled and yields surged as investors brace for higher inflation and rates, some investors expect pullback.

March. While the safe haven typically rallies at times of inflation angst, it has weakened as investors tap profitable trades to make up for losses in other assets. While stocks have held up relatively well, thanks to strong earnings and the tech boom, selling pressure has increased recently. The S&P 500 and Europe’s STOXX 600 index are down 9-10% from recent record peaks, while Japan’s Nikkei has slid almost 13% from February’s record high. Zurich Insurance Group’s chief market strategist Guy Miller said he had moved to an underweight position on equities from overweight before the war as the economic outlook darkens. US consumer sentiment fell more than expected in March, German investor morale has collapsed and S&P Global’s March Purchasing Managers’ Indexes for the euro zone and US – forward-looking business activity indicators – hit multi-month lows. While a strong economy and its energy exporter status buffer the US, it too will take a hit if the conflict keeps energy prices elevated, analysts said. – Reuters

Francesco Sandrini, head of multi-asset strategies at Amundi, said Europe’s biggest asset manager had increased exposure to short-term euro zone government bonds and maintained exposure to five-year US Treasuries on a view that fixed income could perform well once a solution to the crisis emerges. “In other words, we expect central banks will try to look through short term price pressure,” Sandrini said. Bonds were looking more attractive than a few months back, said Russell Investments’ global chief investment strategist Paul Eitelman, adding that dollar strength was unlikely to be sustained over the medium term. The dollar has reasserted itself as a safe haven, rallying over 2% in March. Before the war, investors had diversified away from US assets to other markets, weighing on the dollar, and this theme could return if the conflict ends, analysts said. Gold, meanwhile, has eased 4% in

also whipped around by US President Donald Trump’s intervention in Venezuela, threats over Greenland, and AI disruption. Oil is the clear outperformer, surging roughly 90% this quarter to above US$100. That’s jolted bond investors, who have ramped up interest rate-hike expectations. So long as current supply disruptions are sustained, analysts polled by Reuters estimate oil prices between US$100 and US$190, with an average forecast of US$134.62. Online prediction market platform Polymarket gives a roughly 36% chance of the war ending by mid-May, and a 60% chance by the end of June. Chiming with 2022’s inflation surge, Britain and Italy’s short-dated borrowing costs have jumped 75 basis points each this quarter. US, German and Japanese bond moves are also significant . “In all the historical oil shocks,

only two things matter: one, the duration of the shock and second, the central bank reaction, which defines the broader risk appetite,” said Societe Generale multi-asset strategist Manish Kabra. Since the Iran war started, traders have priced out US rate cuts by year end. In the euro area, they expect three rate hikes and at least two in Britain, having previously expected easing. An emerging markets monetary easing push has been short-circuited. Kabra said one focal point for markets could be the May US Memorial Day holiday weekend, the start of a heavy travel season that could see pressure from consumers on policymakers to contain energy costs. He has increased asset allocation to commodities to 15% since the war started from 10% before, reflecting the growing link between geopolitics and commodities.

Even if a resolution to the conflict boosts near-term sentiment, damage inflicted on Middle East energy infrastructure and higher for longer oil prices will still hurt economic growth and drive up inflation, investors expect. It’s a backdrop that could prompt a bigger retreat for equity markets, while a more protracted conflict that sees growth worries outpace inflation angst could prompt a recovery in bonds. “It’s difficult to look through the noise when the noise is all we have,” said Seema Shah, chief global strategist at Principal Asset Management, which manages roughly US$594 billion (RM2.4 trillion). “We’ve been pushing towards international (stocks) exposure and that continues to make sense, but it doesn’t mean you close off your exposure to the US.” War in the Middle East tops a turbulent first quarter, with markets BEIJING: China’s three largest state-owned airlines said they were cautious about the outlook for this year as the Iran war drives jet fuel prices sky-high, after all returned to losses in the fourth quarter of 2025. China’s aviation industry, already grappling with oversupply in the domestic market, is now dealing with uncertainties over the Middle East crisis that has overshadowed the outlook for airlines globally. “The impact of geopolitical conflicts will persist and the overall momentum of global economic growth will remain insufficient,“ China Eastern Airlines said in its annual report issued late on Monday. Air China , China Eastern and China Southern Airlines had returned to profit in the third quarter thanks to strong summer travel demand. But they struggled to maintain that momentum as aggressive capacity expansion and intensifying competition – including from the country’s expanding high-speed rail network – pushed ticket prices lower even as passenger volumes grew. Guangzhou-based China Southern slipped into the red in the fourth quarter with a loss of 1.3 billion yuan (RM756 million) despite being the only one of the three to post a full-year profit. Shanghai-based China Eastern posted a fourth-quarter loss of 3.7 billion yuan, while Beijing-based Air China, the country’s flagship carrier, last week reported a loss of 3.64 billion yuan in the same period. All three airlines pointed to a

China’s top airlines cautious as Iran conflict lifts fuel costs

Attack on fully loaded tanker highlights rising risks to global energy supplies. – REUTERSPIX

renewed the international market as a growth driver that helped to boost revenue. For the full year of 2025, China Eastern recorded a 22.7% rise in international passenger traffic, while China Southern posted a 19.6% rise and Air China’s international traffic was up 15%. Their international operations came under pressure in the fourth quarter, as they cut capacity to Japan sharply after a mid-November government travel advisory amid tensions between the two countries, which also led them to offer free refunds. According to aviation data platform Flight Master, Chinese airlines carried a record 94 million passengers during the 40-day Spring Festival travel rush in the first quarter of this year, up 4.7% year-on-year. But analysts cautioned that the boost from holiday demand could be threatened by sharply higher fuel costs. Before the Iran war started last month, the global airline industry had forecast record profits of US$41 billion in 2026, but a more than doubling in jet fuel prices has placed that at risk and forced carriers to rethink their networks and strategies. China Eastern was the only one of the nation’s “Big Three” state-owned carriers to manage jet fuel price risk through hedging in 2025. As of Dec 31, 2025, it held outstanding jet fuel hedge positions of 500,000 barrels, scheduled to expire in 2026, its annual report said. – Reuters focus on

Oil tanker off Dubai hit by Iranian strike after Trump’s latest threats

TEL AVIV: Iran attacked and set ablaze a fully loaded crude oil tanker off Dubai early yesterday, after President Donald Trump warned the US would obliterate Iran’s energy plants and oil wells if it does not open the Strait of Hormuz. The strike on the Kuwait-flagged Al Salmi is the latest attack on merchant vessels by missiles or explosive air and sea drones in the Gulf and Strait of Hormuz since the US and Israel attacked Iran on Feb 28. The month-long conflict has spread across the Middle East, killing thousands, disrupting energy supplies and threatening to send the global economy into a tailspin Crude oil prices briefly spiked again after the attack on the tanker, which can carry around 2 million barrels of oil worth more than US$200 million (RM804 million) at current prices. Kuwait Petroleum Corp, the ship’s owner, said the attack happened early yesterday, causing a fire and hull damage. Authorities in Dubai later said they had brought the fire under control following a drone attack on the tanker, with no oil leak

infrastructure used by Iran-backed Hezbollah in the Lebanese capital Beirut. Sounds of explosions were heard in parts of eastern and western Tehran minutes after Israel issued a warning of imminent strikes in the city, Iran’s Tasnim news agency reported yesterday. Residents in the eastern Pirouzi district reported power outages after the blasts, and officials from Iran’s Energy Ministry began efforts to restore power, Tasnim said. A strike on a Shi’ite congregation hall in the northwestern Iranian city of Zanjan yesterday killed three people and injuring 12, a provincial official told Iranian media. The Israeli military said early yesterday that four soldiers had been killed in southern Lebanon, the same area as where three United Nations peacekeepers from Indonesia have been killed, in two separate incidents. Iran’s military spokesman said on state television that targets in its latest missile and drone attacks included “hideouts” of US military personnel in five bases in the region and in Israel. – Reuters

and no injuries to the crew. The jump in oil and fuel prices has started to weigh on US household finances and become a political headache for Trump and his Republican Party before November midterm elections, having vowed to lower energy prices and increase US oil and gas production. The US national average retail price of gasoline crossed US$4 a gallon for the first time in over three years on Monday, data from price-tracking service GasBuddy showed. Tightening global supplies have pushed benchmark Brent crude up 56% this month, the largest rise on record, to above US$113 a barrel. Attacks by both sides show no signs of easing, with fears of a wider regional conflict growing. Iran-aligned Houthis have entered the war by firing missiles and drones at Israel and Turkey reported a ballistic missile launched from Iran had entered Turkish airspace before being shot down by Nato air and missile defenses. Israel has been carrying out missile strikes on what it called military infrastructure in Tehran and