tag

Political instability in Iran, a major oil producer, together with US President Donald Trump's recent threats against the country have reignited fears of disruptions to crude supplies, sparking price volatility on global markets.AFP explains what's at stake.Major producer:Iran remains one of the world's top ten oil producers even though its output has fallen sharply since the 1970s, hit in particular by rounds of US sanctions."In 1974, Iran was the third-biggest producer in the world after the US and Saudi Arabia, and ahead of Russia, producing some 6mn barrels per day," Arne Lohmann Rasmussen, chief analyst at Global Risk Management, told AFP.Today, Iran produces around 3.2mn barrels per day, according to Opec.This remains a significant amount, and Iran is believed to hold the world's third-largest crude reserves, cementing its strategic importance.Additionally, Iran's oil industry is in far better shape than that of Venezuela, another country hit by years of US sanctions.Highly profitable oil:Iranian crude is relatively easy and cheap to extract, with production costs as little as $10 per barrel, making it particularly profitable, Rasmussen said.Only Saudi Arabia, Iraq, Kuwait and the United Arab Emirates enjoy similarly low production costs.By comparison, major Western producers like Canada and the US typically face costs of $40-60 per barrel.With such low costs, Iran gains disproportionately from high global prices, a crucial factor for an economy heavily reliant on oil revenues.Dependence on China:US sanctions imposed since the 1979 Islamic Revolution have left Iran with few export options — especially after Trump revived a "maximum pressure" policy on Tehran upon his return to the White House.Last year, Washington targeted Chinese "teapot" refineries, which operate independently of state-owned oil companies, accusing them of buying Iranian crude.China, however, continues to buy Iranian oil at below-market prices.Iran exported an average of 1.74mn barrels a day in the fourth quarter of 2025, all of it bound for Chinese refineries, according to the markets data firm Kpler.Rasmussen noted that Iran produces roughly equal amounts of light and cheaper heavy crude, making it even more valuable to Beijing, which has lost access to Venezuela's very heavy crude since the US intervention in Caracas on January 3.What might Trump do?Rising tensions in Iran had pushed the international benchmark Brent crude price to $66 per barrel, its highest level since October.But oil prices tumbled after Trump said on Wednesday that the killings of protesters in Iran had been halted, easing fears of instability and potential US military action.He said the US would "watch it and see" about military strikes.If Washington were to attack Iran, "prices could quickly jump to around $80-$85", similar to the spike seen during the twelve-day conflict between Iran and Israel in June, said Kpler analyst Homayoun Falakshahi."What happens next will depend on the nature of the attack and the regime's response," he said.Tehran has issued strong statements but responded cautiously to Trump's comments to avoid escalation with Washington.But if the government's survival is at stake, the market reaction could be far more dramatic.Falakshahi warned that the biggest risks are that "Iran targets oil facilities in other Gulf countries" or attempts to block the Strait of Hormuz, the chokepoint through which 20 % of the world's oil supply flows. 

Middle Eastern mergers and acquisitions (M&A) have demonstrated remarkable resilience and strategic focus, with deal values surging 260% to $53bn in the first nine months of 2025 compared to the same period last year.This exceptional growth comes despite experiencing its lowest levels since the Covid shock earlier in the year, according to BCG's annual Global M&A Report 2025 released Monday.The region's performance is driven by a select group of experienced dealmakers making disciplined, strategic investments amid continued global market volatility.Monthly data reveals that Middle East M&A activity over the past three years has consistently exceeded historical averages, recovering strongly from the pandemic dip.BCG's M&A Sentiment Index, a forward-looking indicator of deal activity, shows increasingly positive sentiment across all sectors, with confidence reaching its highest levels in technology and energy.While Africa, the Middle East, and Central Asia recorded a 6% increase in aggregate deal value, the region continues working to surpass its 10-year average."The Middle East's M&A landscape in 2025 reflects a sophisticated approach to capital deployment, where strategic diversification meets digital ambition," said Samuele Bellani, Managing Director & Partner at BCG."We are witnessing experienced dealmakers making highly disciplined investments that simultaneously strengthen traditional energy capabilities while building new pillars of economic growth in technology and industrial services."Energy transactions remained the cornerstone of Middle Eastern M&A activity throughout 2025, as state-backed entities pursued aggressive domestic consolidation while simultaneously expanding their international footprint through strategic acquisitions.A landmark $13.4bn acquisition reinforces the UAE's ambitious international expansion strategy in the chemicals sector, while a $693mn purchase in power generation and utilities exemplified the ongoing consolidation within the sector.These strategic moves underscore sector resilience while supporting the region's gradual but determined pivot toward renewable energy sources, positioning national champions for the global energy transition.The industrial sector emerged as a central pillar of the Middle East's economic diversification strategy, with governments and sovereign wealth funds systematically building capabilities beyond traditional hydrocarbon dependencies.A $925mn acquisition highlights the accelerating consolidation of critical supply chain infrastructure across the region. This transaction reflects a broader, long-term initiative to establish the Middle East as a premier hub for industrial and logistics services, fundamentally reducing dependency on energy revenues while enhancing the region's global competitiveness across multiple sectors.Technology, media, and telecommunications gained unprecedented momentum in 2025, establishing itself as an emerging pillar of regional deal activity and signalling a fundamental shift in investment priorities.A transformative $3.5bn acquisition, representing one of the largest digital entertainment transactions globally, demonstrates the region's serious ambitions to become a global leader in gaming and digital entertainment.A $855mn acquisition strategically expanded the Middle East’s telecommunications influence into European markets. These high-profile transactions clearly demonstrate that Middle Eastern acquirers are strategically deploying substantial capital to capture growth opportunities across digital platforms, connectivity infrastructure, and entertainment services, aligning perfectly with broader national digital transformation agendas."What we are seeing is a fundamental transformation in how Middle Eastern investors approach M&A," said Samuele Bellani, Managing Director & Partner at BCG."The region's sovereign wealth funds are not just engines of deal flow—they are architects of a new economic paradigm that balances traditional energy strengths with cutting-edge technological capabilities and world-class industrial infrastructure."As 2025 enters its final months, the Middle East has distinguished itself as one of the world's most active and strategically focused M&A markets. Sovereign wealth funds continue providing an exceptionally deep pool of liquidity capable of sustaining robust deal flow regardless of global economic cycles or market volatility. Government-led strategies persistently drive consolidation across industrial and technology sectors, creating unprecedented resilience against the region's historical reliance on hydrocarbon revenues.The combination of steady foreign interest across TMT, financial services, and healthcare sectors demonstrates the region's unique dual advantage of supporting sustainable growth while accelerating economic diversification initiatives.According to BCG, the sustained momentum in Middle Eastern M&A activity reflects a mature understanding of global market dynamics, where strategic patience combines with decisive action to create lasting competitive advantages across multiple sectors and geographies. 

India’s stock market has become one of the calmest in the world — so calm that it’s prompting a rethink of strategies among players in the country’s vast derivatives space.Despite geopolitical flare ups and a recent global selloff in risk assets, the NSE Nifty 50 Index has barely budged for months as domestic money overwhelms foreign flows and derivatives trading curbs choke off volatility. The India NSE Volatility Index, a gauge tracking expectations for future swings, ended Friday at an all-time low.For the traders powering the world’s largest options market by volume, that’s making it harder to profit from the well-known strategies. Volatility is the engine of derivatives trading: when markets swing, investors pay up to hedge, and the cost of contracts rise. When stocks are calm, premiums shrink, eroding returns for option sellers and leaving traditional strategies less profitable.“The market has become more efficient and competitive — that’s meant lower returns for standard vol-selling strategies,” said Nitesh Gupta, partner and derivatives trader at Karna Stock Broking LLP. “In this environment, trading desks will have to increase risk to make better returns.”A turning point came last year, when the Securities and Exchange Board of India launched a sweeping crackdown aimed at curbing speculative retail activity and addressing losses among individual traders. The regulator scrapped several popular weekly options, cutting out the very products that had amplified intraday swings and drying out volume.The impact is clear: While activity has bounced off from a low in February, notional turnover has averaged almost Rs240tn ($2.7tn) a day this year, down 35% from 2024. It’s the first annual decline since data going back to 2017.That drop in derivatives activity has fed back into the underlying market: The Nifty 50 has moved less than 1.5% for 151 consecutive sessions, a run that’s nearing a record set in 2023, and its three-month realised volatility has slipped toward 8 points — lower than in any major global market.Meanwhile, the market’s players have changed. Foreign funds have pulled some $17bn this year — more than ever before — amid trade tensions with the US and a lack of shares tied to the artificial intelligence boom. At the same time, local institutions have become the market’s biggest owners, pouring a record surpassing $80bn into the shares since January. They overtook foreigners in the first quarter, according to figures from data provider primeinfobase.com going back to 2009.The tranquillity hasn’t translated into big rewards for equity holders. The Nifty 50 has gained 9.8% this year, much less than the 27% advance in the MSCI Emerging Markets Index and the 20% rise in the MSCI All-Country World Index.One drag is valuation: India’s benchmark gauge trades at 20 times projected earnings, above its five-year average and far richer than the 13 times for the broader emerging-markets index, according to data compiled by Bloomberg.For derivatives traders, the new regime is forcing a rethink. Strategies often built around selling options and rolling short-term positions may not yield as much as they used to, according to Bhautik Ambani, chief executive officer at AlphaGrep Investment Management Pvt. And the elimination of short-dated contracts leaves fewer ways to express near-term views or capture premiums.“The low volatility environment and reduction in weekly options contracts have hurt strategies that profit from options selling,” Ambani said. But volatility is likely to rebound — it’s just too low right now, he added. 

Qatar National Bank (QNB) confirmed that copper is currently entering a clearly defined phase of structural transformation in global commodity markets.In its weekly commentary, QNB noted that despite cyclical volatility and macroeconomic pressures, the metal remains attractively valued in real terms. Copper continues to benefit from long-term momentum driven by the global energy transition and the rapid expansion of AI-powered digital infrastructure.The commentary highlighted that supply growth remains constrained due to weak capital expenditure and regulatory complexities, reinforcing the likelihood that copper will remain at the forefront of commodities linked to long-term structural transformations.It identified three main factors underpinning the strength of copper prices over the medium and long term. The first is limited supply growth. Recent months have revealed fragility on the supply side, with production disruptions at several major mines and successive downward revisions to output guidance by global mining companies. At the same time, capital investment in the copper sector remains below required levels, whether relative to projected demand or the aging profile of existing mines.These constraints were attributed to difficulties in obtaining permits, lengthy regulatory processes, rising political risks in some producing countries, and shareholder pressure on companies to maintain strict capital discipline.The commentary expected that supply would take years to catch up with rising demand, increasing the likelihood that copper prices will need to remain elevated to balance the market.Regarding the second factor, the bank pointed out that artificial intelligence represents a powerful new source of demand for copper. Advanced data centres, high-performance computing, and semiconductor manufacturing are extremely electricity intensive, necessitating large investments in power grids, substations, and transmission systems, all of which rely heavily on copper.The commentary added that data centres themselves are highly copper intensive, whether in wiring, cooling systems, or backup power infrastructure. As global adoption of AI applications accelerates, this sector could become one of the fastest-growing sources of copper demand in the coming years, potentially rivalling electric vehicles (EVs).The third factor relates to the global energy transition, which represents a long-term pillar of copper consumption. Electrification is central to decarbonisation strategies, and copper forms the backbone of this transition.The commentary explained that renewable energy sources require significantly more copper than fossil fuel-based technologies. In addition, upgrading and expanding power grids, as well as building energy storage and charging systems, all depend on substantial copper inputs.It also noted that rapid growth in electric vehicle demand is boosting copper consumption, as EVs require several times more copper than conventional vehicles, in addition to the associated charging infrastructure.Despite the notable rise in prices recently, the commentary observed that copper remains far from being overvalued from a historical, inflation-adjusted perspective. When adjusted for inflation, copper has underperformed several other metals, indicating scope for further price appreciation without undermining demand.The commentary concluded that, taken together, these factors support a solid and resilient medium- to long-term outlook for copper prices. 

Some of the year’s most popular emerging-market trades such as betting on the Brazilian real and stocks linked to artificial intelligence are becoming a source of concern as money managers warn of risks from overcrowding.Wells Fargo Securities sees valuations for Latin American currencies — among 2025’s top carry trade performers — as detached from fundamentals. Fidelity International is concerned about less liquid markets in Africa that it sees at risk should global volatility spike. Lazard Asset Management meanwhile is keeping its guard up after early November’s firesale in Asian tech stocks — the worst since April.“Investors are too complacent on emerging markets,” said Brendan McKenna, an emerging-market economist and FX strategist at Wells Fargo in New York. “FX valuations, for most if not all, are stretched and not capturing a lot of the risks hovering over markets. They can continue to perform well in the near-term, but I do feel a correction will be unavoidable.”Such caution isn’t without reason. Many parts of the developing-markets universe look overheated after a heady cocktail of Federal Reserve rate cuts, a softer dollar and an AI boom drove stellar gains. The very flows that propelled the rally are now posing the risk of sudden drawdowns that have the potential to ripple through global sentiment and tighten liquidity across asset classes.A quarterly HSBC Holdings Plc survey of 100 investors representing a total $423bn of developing-nation assets showed in September that 61% of them had a net overweight position in local-currency EM bonds, up from minus 15% in June. A Bloomberg gauge of the debt is on track for its best returns in six years.The MSCI Emerging Markets Index of stocks has risen each month this year through October — the longest run in over two decades. Up almost 30%, the gauge is headed for its best annual gain since 2017, when it rallied 34%. That was followed by a 17% slump in 2018 when a more hawkish than expected Fed, a US-China trade war and a surging dollar took the wind out of overcrowded EM stocks as well as popular carry — in which traders borrow in lower-yielding currencies to buy those that offer higher yields — and local-bond trades.“As we approach year-end, there is a risk that some investors look to take profits on what has been a successful trade in 2025 and that this leads to a rise in volatility in FX markets,” Anthony Kettle, senior portfolio manager at RBC BlueBay Asset Management in London, said in reference to local-currency bonds.Stock traders in Asia this month had a first-hand experience of the risks that come with extreme valuations and crowding, when the region’s high-flying AI shares took a sudden nosedive. While tech stocks sold off globally, analysts have cautioned that the risk in some Asian markets are even more pronounced given the sector’s relatively higher weighting in their indexes.One notable example is South Korea’s Kospi — the world’s top-performing major equity benchmark in 2025, with an almost 70% jump. As volatility spiked, the gauge plunged more than 6% in one session before paring half of the losses by the close. “Positioning in Korea’s AI-memory trade is extremely tight,” said Charu Chanana, chief investment strategist at Saxo Markets in Singapore.Rohit Chopra, an emerging-market equity portfolio manager at Lazard Asset Management in New York, has turned cautious after the tech rout.“From a factor perspective, lower-quality companies have been outperforming higher-quality peers,” he said. “Historically, this divergence has not been sustained, suggesting the potential for a reversal if positioning remains concentrated.”Chopra co-manages the Lazard Emerging Markets Equity Portfolio, which has returned 23% over the past three years, beating 95% of peers, according to data compiled by Bloomberg.Options traders appear to be turning bearish on the Brazilian real, which has delivered carry trade returns of around 30% this year. Three-month risk reversals rose to a four-year high earlier this month.The real is the best example of an asset that has had a good run this year and where positioning has now become crowded, said Alvaro Vivanco, head of strategy at TJM FX. There are renewed fiscal concerns for Brazil, which is another reason to be more cautious, he said.Other Latin American currencies such as Chile’s, Mexico’s and Colombia’s are also “looking a little rich,” said Wells Fargo’s McKenna.The trade-weighted value of the Colombian peso is at the highest in seven years, according to data from the Bank of International Settlements, and is one standard deviation above the 10-year average. The same gauge for the Mexican peso is 1.4 standard deviations above the average.Bonds in some frontier markets also emerged as beneficiaries when a broader investor shift away from US assets gathered pace this year. Asset managers such as Fidelity International are now sounding caution on them.“More concerning to me are trades where a sudden rush for an exit can overwhelm the natural buyer base,” said Philip Fielding, a portfolio manager for Fidelity. Markets such as Egypt, the Ivory Coast or Ghana “can also be illiquid in times of higher volatility,” he added.Fielding is the lead manager for the $538mn Fidelity Emerging Market Debt Fund that has returned about 12% in the past three years, beating 84% of peers, data compiled by Bloomberg show.

The US dollar index edged lower on Wednesday after a three-day rally, as the greenback retreated during Asian trading amid market volatility triggered by a sharp fall in gold prices, which rebalanced flows across safe-haven assets. The dollar was last down 0.1% at 151.74 yen, after data showed that Japan's exports rose in September for the first time in five months. The dollar index, which measures the performance of the US currency against six major peers, stood at 98.84, down 0.1%. The euro rose 0.1% to $1.1613, while the pound sterling was steady at $1.3379. The Australian dollar gained 0.2% to $0.6503, and the New Zealand dollar also advanced 0.2% to $0.5753.

Qatar National Bank (QNB) stated that despite significant global macro uncertainty and volatility, emerging markets (EM) are benefiting from moderately positive capital inflows. These inflows have been driven by a depreciating USD, the current cycle of monetary policy easing across major advanced economies, and the availability of high real yields in several sizable EMs. In its weekly economic commentary, QNB said: We believe such tailwinds should continue over the medium-term, particularly as the US further engages in more efforts to re-balance its economy via lower external deficits and manufacturing onshoring. Over the last several years, emerging markets (EM) have suffered from significant volatility in capital flows. This was driven by monetary instability, geopolitical uncertainty and a lack of broader risk appetite from global investors on allocations to non-US assets. According to the Institute of International Finance (IIF), non-resident portfolio inflows to EM, which represent allocations from foreign investors into local public assets, experienced a significant shift from negative territory to positive in late 2023 and continues to be moderately strong this year, even accelerating. The strong performance of EM assets is surprising in a year marked by record global economic policy uncertainty and volatility. In fact, traditionally, EM assets tend to sell-off with increasing uncertainty, as investors seek safe-havens. But this time seems to be different, and two main factors contribute to explaining the inflows to EM. First, a softer dollar continues to bolster the attractiveness of higher-yielding EM assets, providing a tailwind for capital inflows. Under favourable conditions, global investors fund positions in relatively low-yielding currencies of advanced economies, such as the USD, and seek higher-yielding EM assets. A weaker dollar reinforces this tendency by reducing the currency risk for investing in EM. Furthermore, a weaker dollar lessens the burden of debt services of USD-denominated debt for sovereigns and corporates in EM, improving credit quality and reducing risk premiums, therefore favouring portfolio rebalancing towards EM assets. So far this year, the USD has fallen by more than 10% against a basket of currencies of advanced economies and 8% against a basket of EM currencies. Standard measures of currency valuations, such as the real exchange rates, show that the USD still remains "overvalued." Structural factors also point to an environment dominated by further selling pressure for the greenback. The Trump administration seems to be keen to engineer a major adjustment of the economy, favouring narrower current account deficits and the re-shoring of critical manufacturing activities, which would call for additional USD depreciation. This lessens the role of the USD and US Treasuries as safe havens amid global economic instability, contributing to calls for the diversification of portfolios, including via EM assets. Second, the easing of monetary policy by major central banks results in lower yields and looser financial conditions in advanced economies, increasing the relative attractiveness of EM assets. This year, the European Central Bank (ECB) continued its easing cycle, bringing the benchmark interest rate to a neutral stance of 2%, after cutting rates by 200 basis points (bp) since mid-2024. The Federal Reserve re-started its downward cycle with a 25 bps cut, with markets currently pricing a federal funds rate of 3% by the end of 2026, which will continue to diminish the opportunity cost for investing in EM assets. This backdrop of lower rates in advanced economies provides additional support for positive capital flows into EM. Third, several large EMs, particularly in Asia and Latin America, are currently offering yields that are significantly higher than their inflation rates. Those positive "real rates" from countries like Indonesia, Brazil, Mexico and South Africa, for example, contribute to providing higher gain potential and re-assure investors against potential risks of undue currency depreciation. This favours the so-called "carry trade" of borrowing from low-yielding currencies to invest in high-yielding EM currencies. Importantly, the carry trade seems to be the dominant feature of the capital flows to EMs so far in 2025, as the vast majority of inflows are concentrated in debt rather than equity and in jurisdictions with more floating currencies as well as higher real yields.