Oil prices experienced a nearly three percent surge on Monday following attacks by Yemen’s Iran-backed Huthi rebels on vessels in the Red Sea. The rebels claimed responsibility for attacking two “Israeli-linked” ships, part of a series of strikes targeting vessels entering the Red Sea to exert pressure on Israel regarding its conflict with Hamas in the Gaza Strip.
As a response to the escalating situation, five major shipping companies, including BP and Taiwan’s Evergreen, have rerouted their vessels from the Red Sea. The Red Sea is a crucial route for cargo and oil shipments as ships must traverse it to access the Suez Canal.
Amidst this geopolitical tension, US stocks aimed to continue the previous week’s rally, fueled by anticipation of a potential interest rate cut by the US Federal Reserve in the coming year. However, the momentum appeared to wane in Asia and Europe.
Investors are closely monitoring the Bank of Japan’s meeting this week, although speculation about a shift from its current no-rate-hike policy has diminished. Despite a slowdown in buying activity on Friday, equity indices are poised to finish the year strongly, buoyed by the Federal Reserve’s indication of easing monetary policy, decreasing inflation, and a stable economy.
While several Federal Reserve officials tempered expectations of significant rate cuts for the coming year, the Bank of Japan is set to announce its decision on Tuesday. Analysts suggest that a potential shift from years of ultra-loose policy might not occur immediately, as the BoJ is considering maintaining negative interest rates and controlling bond prices to stimulate the economy.
Economists at Societe Generale noted, “The BoJ has little need to rush into making policy changes,” highlighting the consideration of potential shifts in response to rising inflation and challenges faced by the yen. The global economic landscape remains dynamic, with geopolitical events and central bank decisions influencing market sentiments and outcomes.