The oil market has responded with alarm to escalating tensions in the Middle East, with Brent crude prices surging over 2% to $85.15 per barrel yesterday. This sharp increase follows a third consecutive night of US strikes against Iran, heightening concerns over global supply stability and fuelling market anxiety. The price briefly touched $85.64 in early London trading, underscoring the significant impact of these developments on energy markets.
As tensions persist, Donald Trump has indicated that the US intends to reinstate its blockade of Iranian shipping in the Gulf, further escalating the situation. Susannah Streeter, chief investment strategist at the Wealth Club, notes that investors are currently operating in a state of 'stasis', closely monitoring Iran conflict developments and anticipating the knock-on effects on global economies. European gas prices have also seen a sharp spike, reaching levels not observed in three months.
Meanwhile, China's export performance remains robust, with a 27% year-on-year increase last month – its largest rise in four months, surpassing economists' forecasts of an 18.2% gain and outperforming May's 19.4% expansion. The significant growth is largely attributed to the global boom in artificial intelligence, driving demand for chips and computing power.
China's imports also saw a notable jump by 36% in June, reaching a five-year high following a 27.4% gain in May, exceeding economists' forecast of 24% growth. This led to a trade surplus of $125.6 billion in June, up from $105.4 billion the previous month. Senior economist Xu Tianchen at the Economist Intelligence Unit highlights that the continued export strength, largely driven by AI, points to a potentially stronger second half for China's economy.
However, he also cautions that domestic demand remains a drag on growth, with retail sales remaining relatively flat and fixed asset investment being negative last month. The robust export figures underscore China's increasing reliance on international sales to offset sluggish domestic demand amid the prolonged property crisis.