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Straits Times
5 days ago
- Business
- Straits Times
Oil extends rally as escalating Israel-Iran conflict stokes supply disruption fears
An oil storage facility in Iran burns after being hit by Israeli airstrikes on June 15, 2025. PHOTO: ARASH KHAMOOSHI/NYTIMES TOKYO - Oil prices climbed in early Asian trade on June 16 after Israel and Iran launched fresh attacks on June 15, heightening fears that escalating battle could trigger a broader regional conflict and widely disrupt oil exports from the Middle East. Brent crude futures were up US$1.70, or 2.3 per cent, to US$75.93 a barrel by 6.53am Singapore time, while US West Texas Intermediate crude futures gained US$1.62, or 2.2 per cent, to US$74.60. They had surged more than 5.5 per cent earlier in the morning. Both benchmarks settled 7 per cent higher on Friday (June 13), having surged more than 13 per cent during the day, the most in three years. The latest developments have stoked concerns about disruptions to the Strait of Hormuz, a vital shipping passage. About a fifth of the world's total oil consumption passes through the strait, or some 18 to 19 million barrels per day (bpd) of oil, condensate and fuel. A closure of Hormuz could propel international prices to as high as US$130, JPMorgan Chase & Co. has predicted. A jump in oil would add to inflation pressures around the world. Widely watched market metrics are pointing to panic over prompt supply risks, as well as growing fears of a protracted conflict in the Middle East. The gap between the grade's two nearest December contracts – a key indicator on long-term balances – rose by as much as US$1.29 a barrel to US$3.48. Israel temporarily knocked out a natural gas processing facility linked to the giant South Pars field, Iran's biggest, in an attack on June 14, and targeted fuel storage tanks during strikes as part of its campaign against Tehran's nuclear programme. While the attack was concentrated on the Islamic Republic's domestic energy system rather than exports to international markets, oil traders and analysts are preparing for more turmoil. 'Now that threshold has been crossed, there will be questions about whether Israel is going to target more Iranian energy infrastructure,' said Richard Bronze, head of geopolitics at consultant Energy Aspects. 'We appear to be in an escalatory cycle.' Despite US sanctions, Iran remains the third-biggest producer in the Organization of the Petroleum Exporting Countries (Opes. Its allies in Yemen, the Houthi militants, have harassed ships in the region and Tehran has in the past threatened to halt the Strait of Hormuz, a critical transit point in the Persian Gulf. It has, however, never blockaded the key maritime chokepoint. If oil supplies are disrupted, President Donald Trump will likely call on the Opec+ alliance led by Saudi Arabia to tap its considerable spare production capacity, Helima Croft, head of global commodity strategy at RBC Capital Markets, and a former CIA analyst, said in a note on June 13. But it's unclear whether the Opec could offset a severe and prolonged outage in Iran, which pumps around 3.4 million barrels a day. The attempt alone could put the energy infrastructure of the Saudis and the United Arab Emirates into the cross-hairs. After Riyadh backed Mr Trump's earlier crackdown on Tehran during his first term, its critical oil-processing installation at Abqaiq was blown up by the Houthis in 2019. 'Opec spare capacity could be brought online to offset a reduction in Iranian barrels,' said Clay Seigle, senior fellow at the Center for Strategic and International Studies in Washington DC. 'But it would be politically dicey for Saudi Arabia and UAE to benefit in this way at Tehran's expense.' The fact that major oil facilities have so far been spared in the current tumult may offer markets some reassurance. 'We would probably need to see evidence of an intensifying war – with far more widespread damage and mass civilian casualties – for that expectation to change and the risk premium in crude to spike further,' said Vandana Hari, founder of Singapore-based energy consultancy Vanda Insights. The International Energy Agency, the Paris-based watchdog set up by consuming nations, said that global oil markets are well supplied amid slowing fuel demand and recent production increases by Opec+. The agency said it's prepared to tap emergency stockpiles if necessary. On June 15, President Trump said in a Truth Social post that the two belligerent countries should and will make a peace deal. Mr Trump had said before Israel's attacks that he was dissatisfied with rising oil prices. Fears over the Strait of Hormuz are probably excessive too, Ms Hari added. Such an extreme step would cut off Iran's own export route and alienate its biggest customer, China. 'Iran has never actually blocked the channel despite many threats to do so down the years and I don't expect it will do so now,' she said. BLOOMBERG, REUTERS Join ST's Telegram channel and get the latest breaking news delivered to you.
Straits Times
09-05-2025
- Automotive
- Straits Times
Toyota sees $1.6 billion profit hit in two months on tariffs
Toyota Motor said US tariffs will result in a 180 billion yen (S$1.6 billion) hit to operating income in just two months PHOTO: NORIKO HAYASHI/NYTIMES TOKYO - Toyota Motor said US President Donald Trump's tariffs will result in a 180 billion yen (S$1.6 billion) hit to operating income in just two months, with the Japanese carmaker joining a growing list of companies grappling with the fallout of trade turmoil. The company said on May 8 that the impact for April and May has been tentatively factored in, and the situation remains uncertain. That's set to weigh on its full-year results, with its outlook for operating income of 3.8 trillion yen for the year ending in March 2026 falling far short of analyst expectations for 4.7 trillion yen. The carmaker said its latest annual operating profit was 4.8 trillion yen, well below the record 5.35 trillion yen for the 2024 fiscal year – a record for any Japanese company. The manufacturer ended the fiscal year with profit rising 0.3 per cent in the fourth quarter to 1.1 trillion yen. 'When it comes to tariffs, the details are still incredibly fluid, so it's difficult to take steps or measure the impact,' chief executive officer Koji Sato said at a briefing following the results. Toyota will consider building out local product development and manufacturing in the US in the medium to long term, he said. Toyota joins some of the world's best-known companies in sounding the alarm about the likely costs of Trump's tariffs. The auto industry is set to be hit particularly hard, with ever-changing trade policies sparking chaos across the complex web of firms that make up the global supply chain. Some automakers like Stellantis and Mercedes-Benz Group have pulled their earnings forecasts entirely, while others have warned of substantial blows to their bottom lines. General Motors slashed its profit outlook due to as much as US$5 billion (S$6.5 billion) of exposure to auto tariffs, while Ford Motor suspended its full-year financial guidance amid expectations of a US$1.5 billion hit to results. Separately on May 8, Mitsubishi Motors Corp. said it could suffer a 40 billion yen hit from tariffs. That's reflected in its forecast for 100 billion yen in full-year operating income, which fell short of analyst expectations. Last week, Trump offered some relief to the industry by signing a directive that would exempt imported automobiles from separate tariffs on aluminum and steel. That came alongside a separate proclamation that allows carmakers that produce and sell completed automobiles in the United States to claim an offset worth up to 3.75 per cent of the value of US-made vehicles – a temporary reprieve from the 25 per cent tariff on imported parts that took effect May 3. Toyota has maintained that it will stay the course when it comes to its operations in the US. The impact of tariffs has seen Nissan Motor halt US orders for SUVs built in Mexico, while Honda Motor is shifting production of the hybrid version of its Civic from Japan to the US. Mazda Motor will stop exporting one model type to Canada that's made in the US as a temporary countermeasure. The US is the largest market for five of Japan's biggest carmakers. It accounted for around 23 per cent of Toyota's global sales last year, 28 per cent of Nissan's and 71 per cent of Subaru's, according to Bloomberg Intelligence. Of the roughly 5.9 million vehicles that Japan's manufacturers sold in the US last year, roughly half were imported. Major Japanese carmakers, including Toyota, saw a surge in US sales in March as customers rushed to lock in purchases before the tariffs kicked in and potentially add thousands of dollars to car prices. 'It's unlikely we'll make a big pivot since we're still waiting to see the results of ongoing trade negotiations,' said chief financial officer Yoichi Miyazaki. In the short term, Toyota isn't going to raise prices because tariffs were implemented, he said. Despite the uncertainty hanging over the sector, Toyota predicted global consolidated sales to increase to 11.2 million units this fiscal year, from 11 million a year earlier. The carmaker said electrified vehicles, including gas-electric hybrids and battery-electric vehicles, accounted for 46 per cent of sales last year. BLOOMBERG Join ST's Telegram channel and get the latest breaking news delivered to you.
