Deutsche Bank: Will consider increasing holdings of Indian and Indonesian bonds if international oil prices remain below $70

Deutsche Bank Aktiengesellschaft (DB.US) private banking business under the flag indicates that if international oil prices remain at low levels, pushing inflation and bond yields lower, the bank will consider buying Asian emerging market bonds. The Chief Investment Officer of the emerging markets department responsible for serving high net worth clients, Jackie Tang, said in an interview on Tuesday that if international oil prices can stay around $65 to $70 per barrel in the next two months, Deutsche Bank Aktiengesellschaft will be more confident in focusing on markets like Indonesia and India. These two Asian economies are most sensitive to energy price increases and are also among the economies in Asia most affected by high oil prices. Brent crude oil futures prices had been hovering around $72 per barrel for over a week, but following the US launching a new round of military strikes against Iran on Wednesday, oil prices surged to over $80 per barrel. As of the time of writing, Brent crude oil futures were at $77.82 per barrel. The US Central Command announced on Wednesday that it is launching a new round of strikes against Iran to weaken Iran's ability to threaten the free navigation of the Strait of Hormuz. An American official stated that the scale of this action is expected to exceed the attack on Tuesday. According to Iranian media reports, explosions were heard in several locations including Abbas Port, Abu Musa Island, and Bushehr. Iran has threatened to launch a large-scale retaliatory attack against US military bases in the region and claimed to have attacked US military targets in Bahrain and Kuwait, leading to further retaliatory strikes by the US. US President Trump stated on Wednesday that the temporary peace agreement reached with Iran "is over," and he did not rule out re-imposing a blockade on Iranian ports, warning that oil prices could rise further, even suggesting that US military strikes could include "capturing" Iran's oil export hub on Kharg Island. He stated on social media that the US airstrikes were a "response" to Iran's attacks on commercial ships, and threatened that "if such events happen again, the consequences will be more severe." However, Trump also ruled out the possibility of a full-scale war. The escalation of tensions has directly impacted Iran's oil exports. Earlier this week, the US Treasury revoked a waiver allowing Iran to sell oil, completely reversing a key provision of the temporary agreement. During the agreement, millions of barrels of Iranian oil were able to leave the Gulf, but now the fate of this oil is highly uncertain. The passage of the Strait of Hormuz is a focus of the market. After the US launched airstrikes against Iran in late February, Iran had nearly closed the strait, forcing oil-producing countries in the region to shut down oil fields due to full storage tanks. Ship traffic in the strait had partially resumed with the temporary agreement, but analysts believe the situation never fully returned to normal. Scott Sheldon, an analyst at commodity broker TP ICAP, said, "If we face a closed Strait of Hormuz again, oil prices could rise by another $10. But if oil continues to flow, the upside potential may be limited. At the moment, no one can say for sure." Meanwhile, global bond yields are generally rising, reflecting investor concerns about a resurgence in inflation and prospects for further central bank rate hikes. Tang said that until shipping in the Strait of Hormuz returns to normal, it will be difficult for the emerging market bond market to see a meaningful rally. He said, "Given the current global situation, now is not the time for the market to turn optimistic." He added that if energy prices in Indonesia and India can remain low for three to six months, investors may begin to believe that the trade balance of these countries has improved compared to the past. Tang also stated that since taking over as Chief Investment Officer of emerging markets in October last year, he does not currently hold Indonesian government bonds, and has also not built up "larger positions" since taking office.