Market Insight by Daryl Liew - Impact of Middle-East tensions on Asia

Risk assets have had a choppy start to the year with the escalation of the conflict between the US and Iran pushing oil prices higher. 

This development could negatively impact our outlook for Asian markets. Most countries in Asia are net oil importers, and higher energy prices not only impact discretionary consumption, but also leads to a deterioration of the trade balance and increases inflation, putting local currencies under selling pressure. This, in turn, forces Asian central banks to keep interest rates higher than they would otherwise have liked to defend the currency.

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