Rising oil is still the big market risk despite today’s pullback, analysts say
Markets kept their cool on Monday amid a fast-moving and volatile geopolitical landscape in the Middle East — but the longer-term risk premium has likely risen, while oil prices remain on edge, analysts said.
Iran launched more than 300 drones and missiles against military targets in Israel on Saturday, marking the first direct attack on the Jewish state from Iranian territory. The offensive caused limited damage and no fatalities.
Iran said it was acting in self-defense in response to a strike on its diplomatic compound in Damascus, Syria, earlier this month. Israel has declined to comment on its involvement.
Also on Saturday, ahead of the strike, Iran seized a container ship in the Strait of Hormuz that Tehran said was linked to Israel. The sea passage is described as the “world’s most important oil chokepoint,” with flows totaling around 21% of global petroleum liquids consumption in 2022, according to the U.S. Energy Information Administration.
By Monday, global players including the U.S. and European leaders were seeking to cool tensions, urging Israel to show restraint in its response.
Foreign exchange markets are pricing in “near term de-escalation” in the wake of the weekend events, Adarsh Sinha, co-head of Asia FX and rates strategy at Bank of America, told CNBC’s “Squawk Box Europe” on Monday. The ‘safe haven’ U.S. dollar was 0.15% lower against a basket of major currencies early Monday, also weakening against the Iranian rial and the Israeli shekel.
Sinha nevertheless added that “the fact that we moved from a proxy confrontation to a direct confrontation, even though that de-escalates in the near term, the longer term risk premium probably goes up.”
“I think the FX market ultimately will take its cue from oil prices because ultimately, that’s the channel through which it spills over to the FX market,” he said.
Oil prices were lower in early Asia hours on Monday, cooling off from Friday gains which built on the expectation of an Iranian strike. Nymex WTI crude futures contracts with May expiry were 0.81% lower at $84.97 per barrel by early afternoon in London, while the ICE Brent contract with June delivery was down 0.73% at $89.79 per barrel.
Markets had priced in the “well-telegraphed” event, which explains the price decline, Amrita Sen, founder of Energy Aspects, told CNBC’s “Street Signs Europe.”
That doesn’t mean prices will continue to go down, she added — although their course will hinge on Israel’s reaction and next steps.
Risks increased
Economists and analysts agreed that overall long-term risks and uncertainty are now heightened.
“The unprecedented Iranian attack on Israeli targets casts a shadow over the economic and financial outlook beyond the region itself. The risk that the conflict in the Middle East may escalate further has increased,” Holger Schmieding, chief economist at Berenberg Bank, said in a Monday note.
Conflict between Israel and Iran is unlikely to have a severe impact on the global economy, Schmieding continued, pointing to the relatively limited effect to the economic outlook caused by Houthi attacks on cargo ships in the Red Sea.
Disruption to oil shipments through the Strait of Hormuz “would be a very different matter,” he said, calling this the “key risk to watch.” However, this hit to oil exports would hurt Iran badly, Schmieding continued, meaning that Tehran is unlikely to want to escalate to such a level.
A possible Iranian blockade of the Strait of Hormuz will hold Brent prices above $84 dollars per barrel for the remainder of the year and cause a potential rally to over $100 per barrel in the event of “open war,” according to Bartosz Sawicki, market analyst at Conotoxia.
Iran’s assault has already threatened regional oil supply in a market that has been “broadly balanced” in the first part of the year, and increased the risk of flipping to undersupply, Sawicki said. Iran’s crude production totals nearly 3.5 million barrels per day, accounting for around 3.3% of global production, he noted.
“A tougher stance on Iran and stricter enforcement of previous sanctions should be expected,” Sawicki, said. Significant retaliation by Israel could meanwhile trigger an oil price rally, strong demand for the U.S. dollar and renewed buying of gold, he added.
European equity markets were slightly higher Monday, with U.S. futures also brightening from a Friday retreat.
Impact on stocks could come by way of a change to interest rate expectations, analysts at Deutsche Bank said in a note.
Yet what form that will take is uncertain, they add. Higher oil prices could keep inflation sticky in major economies, pushing back the timing of interest rate cuts — while a “geopolitical shock” could bring such trims forward by threatening growth.
A new report states that Tesla will pause part of new Model Y production at Gigafactory Shanghai for 3 weeks to upgrade the lines.
The shutdown will extend beyond the regular Chinese New Year.
The Chinese New Year is technically 2 weeks long, but the official holiday lasts a week, during which significant parts of the country’s industries shut down.
That includes the auto industry and Tesla, but it looks like the American automaker plans to do things a bit differently this year after having just started production of its updated Model Y at Gigafactory Shanghai.
According to a new report from Bloomberg, Tesla plans to shut down part of its new Model Y production lines from around January 22 to February 14.
In comparison, Tesla only plans to shut down production of the Model 3, the only other vehicle produced at the plant, from January 26 to February 3.
Tesla only recently started production of the updated version of its best-selling electric SUV. The report states that the automaker will take advantage of this extended Lunar New Year shutdown to upgrade parts of the production lines in order to streamline and ramp up production capacity.
The automaker delivered about 480,000 Model Ys in China in 2024 – up about 5% year-over-year.
Reports claimed that Tesla received over 50,000 orders for the updated vehicle version in the first 24 hours of the unveiling.
Electrek’s Take
It makes sense. Over the last few weeks, Tesla has basically been running a pilot of production of the upgraded version, which is entirely different from the previous version, but there are enough differences that new parts and processes can create bottlenecks.
Tesla likely found ways to optimize production during that time and now will implement it during this extended shutdown.
We will try to keep track of the Model Y production and rollout in China as any delay or production issues can be extremely impactful, considering the Model Y is the world’s best-selling EV and China is the biggest EV market.
Any kind of issue there can be extremely impactful on Tesla and the broader EV market.
FTC: We use income earning auto affiliate links. More.
American Honda shared a business outlook for 2025 during a recent briefing with the media. In terms of electrification, the next 12 months for Honda will be much of the same: facelifting tried-and-true ICE models like the CR-V and Passport. However, there was one exciting piece of news from Honda on the BEV front—the automaker has confirmed it will begin US production of an Acura RSX EV.
Honda and its premium sub-brand Acura, for that matter, are getting more and more coverage on Electrek’s homepage thanks to the combined efforts in adding new BEV models… although that transition has still been relatively slow compared to other OEMs.
Nevertheless, Honda launched the all-electric Prologue, which has found quick success with US consumers. Shortly thereafter, Acura launched the ZDX, which sits atop the same Ultium platform as Prologue, provided through a partnership with GM.
Honda has since backed out of that partnership—at least the part where GM provides vehicle architecture—and has been developing its own in-house platform that will one day power its new 0 Series lineup of BEVs. These originally debuted at CES 2024 and remerged at this year’s event as prototypes—and now they’re white! They will also feature a new proprietary vehicle OS called ASIMO (more on that below).
While we await the arrival of those Honda BEVs, we can expect to see a new Acura model hit the market first, based on an SUV called the Performance EV Concept, which debuted at Monterey Car Week this past August. At the time, the Acura Design Studio described the concept as “the evolution of Acura’s performance-focused design direction and the brand’s next all-electric model.”
That new production model didn’t have a name yet, but we did learn it would be the first BEV to debut on Honda’s new bespoke platform and the first all-electric model to roll off its assembly lines at the new Honda EV Hub in Marysville, Ohio.
Today, we learned that the Performance EV Concept has evolved into a full-fledged passenger model with a familiar name – the Acura RSX EV.
Acura brings back the “RSX” nameplate as an EV SUV
During a media briefing earlier this week, American Honda shared its 2025 outlook, led by vice president of sales, Lance Woelfer. This year’s strategy includes the production of its first original BEV in Ohio using domestically and globally sourced parts as a new hybrid model and several ICE vehicles (boo).
Woelfer confirmed that the first bespoke all-electric model coming out of Ohio will be the Acura RSX EV. This move marks the return of a notable nameplate in the Acura lineup that evolved from the original Honda Integra. The Acura RSX was sold in North America from the early- to mid-2000s and still has a decent fanbase, especially amongst fans of the Honda Integra and Japanese Domestic Market (JDM) enthusiasts.
Acura revived the Integra nameplate in 2021 as a Honda Civic-based liftback, and although that model is sharp, it remains combustion, hence why Acura has revived the RSX name as an EV model. Per Mike Langel, assistant vice president, Acura National Sales.
The nameplate pays homage to the Acura RSX with its coupe-like silhouette, but it truly represents a forward-looking approach to fun-to-drive performance. Our second all-electric SUV will solidify our EV credentials even as its ICE stablemates, the all-new ADX, RDX, MDX, TLX and Integra continue to attract new buyers to the Acura brand.
The Acura RSX EV, seen in a unique camo wrap above, looks quite sleek, but I predict Integra and RSX purists may reject this new model out of the gate because it’s undeniably an SUV, not a sporty compact like the vehicle(s) it’s named after. This reminds me of when Ford introduced the Mustang Mach-E, and brand loyalists argued, “That’s not a Mustang.” Just like the Mach-E, the Acura RSX EV represents a new generation of performance models, no matter what you call it.
The new SUV also represents a massive step for Honda and its premium brand, as the Acura RSX EV will be the first model to utilize Honda’s new EV platform and its new ASIMO OS operating system introduced at CES 2025. At the time, Honda said ASIMO will constantly update its in-vehicle software via over-the-air (OTA) updates for both the digital UX and integrated dynamics controls that will allow the automaker to deliver “a personalized ownership experience that will enhance the joy of driving.”
Acura says the RSX EV is slotted to begin development testing in real-world conditions this week ahead of planned production in Ohio later this year. We plan to visit Honda’s EV Hub later this month, so perhaps we can capture some images of where this new SUV will be built or, better yet, look at the prototype up close.
FTC: We use income earning auto affiliate links. More.
-
Sports2 years ago‘Storybook stuff’: Inside the night Bryce Harper sent the Phillies to the World Series
-
Sports9 months agoStory injured on diving stop, exits Red Sox game
-
Sports1 year agoGame 1 of WS least-watched in recorded history
-
Sports2 years agoMLB Rank 2023: Ranking baseball’s top 100 players
-
Sports3 years ago
Team Europe easily wins 4th straight Laver Cup
-
Environment2 years agoJapan and South Korea have a lot at stake in a free and open South China Sea
-
Environment2 years agoGame-changing Lectric XPedition launched as affordable electric cargo bike
-
Business2 years agoBank of England’s extraordinary response to government policy is almost unthinkable | Ed Conway