Tuesday: Markets Volatile as Iran Conflict Goes On

Global markets remained jittery on Tuesday as the Iran conflict kept oil prices elevated and investors chased safety. The US 10‑year Treasury yield slipped 11.7 basis points to 4.32%, reflecting hopes that the geopolitical shock won’t spark runaway inflation. Brent crude hovered around $107 a barrel and WTI near $103, keeping energy‑related cost pressures in focus for policymakers and corporations alike. The modest rise in the US dollar index and mixed equity moves underscored the delicate balance between growth expectations and inflation risk.

In the Asia‑Pacific corridor, ANZ economists highlighted divergent credit trends. Australia’s private sector credit is projected to rebound from a flat January, with a modest uptick expected in February after a sharp slowdown. However, housing‑related credit, especially investor financing, shows early signs of moderation after a decade‑high surge. Across the Tasman, New Zealand’s March business‑confidence survey will capture the first tangible effects of the energy shock, while February job growth lagged expectations, prompting a downgrade of the Q1 employment outlook. These data points illustrate how higher fuel costs are already filtering into credit conditions and hiring decisions.

The deep‑dive interview with ANZ’s chief economist for Southeast Asia and India, Sanjay Mathur, quantified the fiscal strain of fuel subsidies. Subsidy bills range from 0.4% of GDP in the Philippines to 1.3% in Thailand, translating to roughly $3.4 billion in Thailand’s oil‑fund deficit—now trimmed to about $336 million as prices stabilize. Thailand can still borrow without crowding out private credit, but the fund will face market pressure within three to four months. Indonesia’s subsidy impact is modest, while Malaysia leans on state‑owned oil dividends to cushion spending. India, meanwhile, has suspended diesel excise duties and reduced gasoline taxes, covering about 55% of its subsidy load, yet faces additional pressure from rising fertilizer costs. The consensus is that once the short‑term leeway expires, governments will be forced to cut spending or raise prices, risking higher inflation and slower growth across the region.