Another week of war in the Middle East and energy price volatility, with updates today on US trade and military policy in the region.
That crisis has sparked a surge in UK borrowing costs, taking 10-year gilts to highs not seen since the 2008 financial crisis.
Elsewhere, amid ratcheting EU-US tensions over the handling of hostile states, Brussels came a step closer to implementing its trade deal with the US.
The big picture: Disruption of global energy supplies continues amid military action in the Middle East.
Despite the International Energy Agency’s intervention last week, making its largest ever single release of strategic oil reserves to ease oil prices, strikes by both Iran and Israel on energy facilities this week have led to prices spiking this week.
The US drew the ire of many European leaders last week when it eased restrictions on Russian oil, waiving sanctions on third parties buying supplies already in transit.
Today (20 March), reports suggest the same exemptions could be applied to Iranian oil, with US Treasury secretary Scott Bessent telling Fox news that he was considering easing restrictions on roughly 140 million barrels of oil already at sea, which he said could push prices down for up to two weeks.
Experts have criticised the move as likely to have a muted impact on oil prices, while funding Iran’s war machine. Long-term commodity journalist Javier Blas said that the White House was looking at the wrong oil price in its drive to lower costs, focusing on the West Text Intermediate rate instead of other fuel sources more commonly used by consumers.
On shipping, Axios reports that Trump is considering occupation of Iran’s Kharg Island, home to processing sites through which 90% of its oil pass. The occupation’s aim would be to force the country to desist with attacks on commercial shipping in the Strait of Hormuz, which are preventing oil exports from the region.
Trump escalated his attacks on Nato allies for not offering more military support for commercial ships in the region, calling them cowards on social media and claiming the defence organisation is a 'paper tiger' without the US.
Good week/bad week: A bright spot for trade cooperation across the Atlantic this week.
Although tensions over Russia and Iran are high, the European Parliament’s trade committee voted to implement the trade deal agreed with the US last year, cutting tariff rates on US goods to zero.
Full implementation will still require the deal being approved by the wider parliament and accepted by member states. However, the decision is a significant step forward after the deal was jeopardised by Trump’s rhetoric about Greenland at the start of the year.
UK borrowing costs rose to their highest level since the 2008 financial crash this week. As with many economic woes of late, that stems directly from rising energy costs caused by the Middle East war.
Ten-year gilts – which track long-term borrowing costs – hit 4.94% on Friday, while two-year gilts – aligned to Bank of England interest rate decisions – rose 0.11 percentage points to 4.52%.
This followed rates being held at 3.75% yesterday. Several rate cuts has been forecast for this year, but according to the FT, analysts are now factoring in rate rises of up to 0.75% as a result of the conflict.
How’s stat? 50%. That’s the new maximum UK tariff rate on non-quota imports of steel, published this week in the government’s new steel strategy.
The move to protect domestic industry, which also includes new targets for British firms to buy local, was welcomed by UK Steel director general Gareth Stace, who described the strategy as “incredibly bold”, and praised the quota reductions for going further than comparable nations.
It “make[s] clear that the Government recognises the distortions that overcapacity and extreme subsidy have created in global steel markets”, Stace said.
However, some within industry have warned that the measures could place pressure on UK manufacturers, who may struggle to absorb the greater cost of more expensive imports or domestic steel products.
This week's Commodity in Focus reviewed the new strategy and the implications for industry.
Quote of the week? “No trade deal with any individual nation can outweigh the importance of our relationship to a bloc with which we share a land border, with which our supply chains are closely intertwined, and it accounts for almost half our trade.”
Rachel Reeves, delivering the annual Mais Lecture at Bayes Business School. She repeated her arguments that closer EU ties and pursuing a ‘reset’ of the relationships is one of three key pillars of growth.
Economists have warned that the current path towards alignment on “agrifood, electricity and emissions trading”, would yield a modest GDP boost in contrast to the estimated 4% GDP lost per year as a result of Brexit.
Earlier this week, London mayor Sadiq Khan pushed for Labour to campaign to rejoin the EU in the next election, while trade minister Chris Bryant said government should be "think[ing] bigger" when it comes to the EU reset.
The week in customs: A new release of the Customs Declaration Service (CDS) will drop next week (28 March), and the latest instalment of Customs Corner addressed the key changes for traders to be aware of.
Customs practice director Anna Doherty explained that traders will need to enter information pertaining to both preferential origin and non-preferential origin when making a declaration – previously the field for non-preferential had been optional when the one for preferential origin was complete.
Customs Corner also covered the HMRC’s voluntary disclosure process (VLDIS), which enables businesses to report any instances where goods they’re moving don’t appear to have an appropriate history of paperwork.
What else we covered: A Trade Digest of European news featured ongoing efforts to pass Brussels’ 20th round of sanctions on Russia and its extension of previous measures.
Our latest Export Controls Brief delved further into faltering resolve on Russia sanctions, and provided updates on the Customs Declaration Service issue impacting export control licences and a change to Open General Export Licences (OGEL) for Typhoon aircraft.
We also heard from executive editor William Barns-Graham ahead of this year’s International Food and Drink Event (30 March – 1 April), as he highlighted the opportunities for traders in the sector.
True facts: Tuesday (17 March) was St Patrick’s day, a national holiday for Ireland.
Less cause for celebration was data released yesterday indicating a dramatic fall in the country’s exports to the US, with a 72% drop recorded this January compared to the previous year.
It’s worth noting this followed a pre-tariff export surge in the wake of Trump’s 2024 election victory. Ireland is a vital pharmaceutical manufacturing hub for US firms Eli Lilly and Pfizer, with
A 29% increase in exports of medicinal and pharmaceutical goods to all territories brought the total income from these types of goods to just under €100bn.
