The currencies of several major Asian oil importers are ripe for depreciation with the spike in international crude oil prices, analysts at Barclays said on Tuesday.
The surge in oil prices in recent days “implies risks for most Asian FX in the near term, especially if oil prices move even higher in the event of a potential escalation in the conflict,” Barclays’ analysts wrote in a note to clients carried by Bloomberg.
Thailand’s baht, the Taiwanese dollar, and the Korean won are the Asian currencies most at risk of depreciation, according to the UK-based bank.
Oil prices soared on Friday after Israel launched coordinated strikes against Iranian nuclear and military targets. The intraday surge on Friday was the biggest jump in crude oil futures since 2022 when Russia invaded Ukraine.
Prices eased on Monday as no major oil export infrastructure has been targeted yet, and amid reports that Iran had signaled it is seeking de-escalation.
Oil resumed its upward trajectory early on Tuesday, after U.S. President Donald Trump cut short his G7 summit participation and urged “everyone” in Tehran to evacuate immediately. WTI Crude was at $73 per barrel early Tuesday, and Brent Crude jumped by 2% to just below $75.
“Without a disruption to supply, Brent would likely trade back below USD 70, while the opposite could see it trade above USD 80, highlighting a market where volatility remains firmly in the driving seat,” analysts at Saxo Bank said in a note on Tuesday.
According to FX strategists at ING, “geopolitical developments have stormed into the picture, and the implications of the Middle East crisis for energy markets can easily spill over into central banks’ inflation assessments.”
The Fed, which is widely expected to keep key interest rates on hold on Wednesday, “can now use energy market volatility as an argument to fend off US President Donald Trump’s calls for rate cuts while it assesses the depth of the tariff impact on inflation,” they added.
By Charles Kennedy for Oilprice.com
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