The Strait of Hormuz shutdown has entered its 58th day, creating a critical oil supply shortage for Asian refineries and threatening severe price increases for fuel and essential petrochemicals.
- Energy Crisis: Asian refineries face potential shutdowns as strategic reserves in Japan, Korea, and China are depleted.
- US Economic Stress: Consumer sentiment has fallen to 49.8, the lowest level recorded since the survey began in 1946.
- Fed Leadership: The Trump administration has dropped its criminal investigation into Jerome Powell, clearing the way for Kevin Warsh to likely become the new Fed boss.
Global Energy and Commodity Shocks
The ongoing blockade of the Strait of Hormuz has restricted traffic to just 18 ships over the past week, all of which required Iranian consent. With oil flows to Asia now critical, refineries may begin shutting down if supplies from Africa and the Americas cannot fill the void.
The crisis is expected to drive severe price increases not only for fuel but also for plastics and fertilizers. Market attention has shifted toward the Urals oil price, as competition for remaining supply intensifies.
In the US, oil rigs in service have fallen to their lowest levels since May 2020. Meanwhile, enthusiasm for coal is retreating, with prices slipping below US$130 per ton, though new zero-emission coal fuel cell developments in China may offer a long-term alternative.
US Economic Sentiment and Policy
The University of Michigan’s Consumer Sentiment Index was revised to 49.8 for April, marking the lowest point in the survey’s history. This decline was observed across all demographics and is attributed to widespread price shocks caused by the Iran conflict.
Inflation expectations have surged, with year-ahead expectations jumping to 4.7% from 3.8%—the largest one-month increase since April 2025. Business condition expectations have also deteriorated, nearly matching levels seen during the introduction of reciprocal tariffs a year ago.
Regarding monetary policy, the Trump Administration has dropped its criminal investigation into Fed Chair Jerome Powell. This move makes Kevin Warsh the likely successor as the head of the Federal Reserve.
International Economic Indicators
In Australia, the headline annual CPI is expected to rise to 4.7% from 3.7% in March. In Japan, inflation remained relatively stable at 1.5% in March, representing near four-year lows despite fuel import pressures.
Canada reported retail sales growth of 3.8% in February, though March increases were largely attributed to higher fuel costs.
China’s March net inflow of foreign direct investment saw a modest increase of US$13.0 billion from February. Additionally, China’s securities regulator has initiated its first enforcement action against a domestic company for listing on the Nasdaq without approval.
The Russian central bank cut its policy rate by 50 basis points to 14.5%.
Market Data
Oil prices have seen a significant net rise over the past week. Brent is currently at US$105.50/bbl, while American oil is just under US$94.50/bbl. The Russian Urals benchmark has jumped to US$107.50/bbl.
Gold opened at US$4709/oz, down US$148/oz for the week, while silver is at US$75.50/oz. Bitcoin is trading at US$78,040 with low 24-hour volatility.
The New Zealand dollar remains unchanged at 58.8 USc and 82.2 AUc. The NZ Government 10-year bond rate is steady at 4.72%.
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