“Asian currencies and aviation” hit hard
- Asian currencies suffer heavily
“Asia” is the region directly affected by the situation because it has historically relied on oil imports through the “Strait of Hormuz” for as much as 80%, a route now disrupted by the war.
As oil becomes more expensive to buy, economies have stumbled, affecting Asian currencies.
India’s rupee, Indonesia’s rupiah and the Philippine peso have plunged to record lows, forcing many countries to draw on reserves to support their currencies or reluctantly raise interest rates, such as Sri Lanka, which had to raise rates sharply by 1.00%.
- Europe’s economy takes a battering
Europe has been badly hurt by the impact of expensive oil, with economic activity in the “eurozone” contracting at the sharpest pace in two and a half years.
The European Central Bank (ECB) has warned that the financial system is becoming fragile, while businesses in England have reported clear declines in sales and business activity.
At the same time, raw material and energy costs have moved in the opposite direction, rising sharply.
Long-term bond yields surge
Government bond prices have fallen sharply, moving in the opposite direction to yields, which have surged because investors expect central banks to keep interest rates high to fight inflation.
This pushed the 30-year US government bond yield above 5%, the highest level since 2007.
German government bond yields, meanwhile, rose to a 15-year high because markets expect the European Central Bank to raise interest rates at least two more times this year.
- Aviation and luxury goods businesses hit hard
However, not every industry has escaped the impact.
The S&P 500 airline stock index has fallen by more than 6% because of disruption to flights worldwide.
Global luxury-brand stocks have fallen by as much as 10% as investors worry that inflation will prompt middle- to upper-income consumers to tighten their belts and cut spending.
