WS #1779

The Middle East conflict has intensified further with new attacks on critical energy infrastructure, directly threatening global oil and gas supplies. Saudi Arabia reported a drone hit on the SAMREF refinery in Yanbu, with damage assessment underway, marking the first strike in the country's western region. Kuwait faced additional fires at the Mina al-Ahmadi refinery following Iranian drone attacks, corroborated by multiple sources including Factal and KUNA. These incidents indicate a broadening conflict as Iran retaliates, with fears of disruptions involving Iran, Saudi Arabia, the UAE, and Qatar, and potential closure of the Strait of Hormuz. Iran's proposal to impose a 10% duty on all ships passing through the Strait of Hormuz, which could generate $73 billion annually, adds to the geopolitical tensions and supply risks. This surge in attacks on key export facilities is likely to push oil prices higher, affecting energy markets and increasing volatility in related sectors, dampening some bearish energy signals through potential military intervention but exacerbating market volatility due to ongoing uncertainty and supply disruptions. Central banks are responding to the heightened uncertainty, with the Swiss National Bank (SNB) noting that the conflict in the Middle East has made the economic outlook considerably more uncertain and that inflation is likely to increase more strongly in the next quarters. The SNB held rates steady at 0%, as did the Riksbank, which stated rates will remain at this level for some time. Both banks' statements underscore the geopolitical risk premium now influencing monetary policy, with the SNB increasing its willingness to intervene in FX markets due to the crisis. Market impacts are already visible, with cryptocurrencies like Bitcoin and Ethereum down significantly (e.g., BTC -5.31%, ETH -6.87%), reflecting broader risk aversion amid the turmoil. Geopolitical tensions are further strained by fragmented global responses, with Trump calling for NATO warships in the Gulf to counter Iranian sea mines, but Europe rejecting these demands. The U.S. is considering sending thousands of troops to secure the Strait of Hormuz, which could stabilize energy flows but risks further escalation. In other developments, BP sold its Gelsenkirchen refinery to the Klesch Group, raising its structural cost reduction target by $1 billion to $6.5-$7.5 billion by 2027, which may offset some bearish energy signals by streamlining operations. Google partnered with DocMorris to transform digital health using Gemini AI, indicating bullish sentiment in the technology sector. However, CK Hutchison reported FY net income of HK$11.84B, missing estimates of HK$21.74B, reflecting negative impacts in finance. The UK steel strategy and Mozilla's free VPN launch in Firefox 149 represent minor developments in economic and technology sectors, respectively.