Deutsche Bank's private banking arm has indicated it would consider purchasing emerging market bonds in Asia if international oil prices remain low, thereby driving down inflation and bond yields.
In an interview, Jackie Tang, the unit's Chief Investment Officer for Emerging Markets serving high-net-worth clients, stated that the bank would gain more confidence to focus on markets like Indonesia and India if crude oil prices can stay around $65 to $70 per barrel for approximately the next two months.
These two Asian economies are among the most sensitive to rising energy prices and are the most impacted by high oil costs in the region.
Brent crude futures had hovered around $72 per barrel for over a week, but surged past $80 after the US launched a new round of military strikes against Iran. At the time of writing, Brent crude was trading at $77.82 per barrel.
The US Central Command announced the new strikes, aimed at degrading Iran's ability to threaten freedom of navigation in the Strait of Hormuz. A US official stated the operation's scale was expected to exceed Tuesday's attacks.
Iranian media reported explosions in areas including Bandar Abbas, Abu Musa island, and Bushehr. Iran threatened large-scale retaliatory strikes on US bases in the region, claiming attacks on US military targets in Bahrain and Kuwait, prompting further US retaliatory strikes.
US President Donald Trump stated that the temporary peace agreement with Iran was "over," did not rule out reimposing a blockade on Iranian ports, warned oil prices could climb further, and hinted strikes might include "taking over" Iran's key oil export hub, Kharg Island.
He stated on social media that the US airstrikes were "retaliation" for Iran's attacks on commercial shipping and warned of "far bigger" consequences if such events recur. However, Trump also ruled out a full-scale war.
The escalation has directly impacted Iran's oil exports. The US Treasury earlier this week revoked a sanctions waiver that allowed Iran to sell oil, completely reversing a key provision of the prior temporary agreement. Millions of barrels of Iranian crude that were shipped from the Gulf during the agreement's duration now face significant uncertainty.
The Strait of Hormuz's status is a key market focus. After US-Israeli airstrikes in late February, Iran forced the strait to nearly close, causing regional producers to shut oil fields as storage tanks filled. Ship traffic recovered after the temporary deal, but analysts believe the situation never fully normalized.
Scott Shelton, an analyst at commodities broker TP ICAP, noted that if the Strait of Hormuz were closed again, oil prices could rise another $10, but further gains might be limited if oil keeps flowing, adding the current situation is highly uncertain.
Meanwhile, global bond yields have risen broadly, reflecting growing investor concerns about resurgent inflation and prospects for further central bank rate hikes.
Tang stated that until shipping through the Strait of Hormuz normalizes, the emerging market bond rally is unlikely to be sustainable, adding it is not the time for markets to turn optimistic given the global situation.
He added that if energy prices in Indonesia and India can stay low for three to six months, investors might start believing these countries' trade balances have improved compared to the past.
Tang also noted that since taking over as CIO for Emerging Markets last October, he currently holds no Indonesian government bonds and has not established any "significant" positions in them since starting the role.
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