Oil prices rose more than 2% after the conflict in the Middle East worsened, with the US carrying out a third consecutive night of strikes against Iran. Two tankers came under fire in the strait of Hormuz.
Brent crude, the global benchmark, climbed 2.2% to $85.15 a barrel, after touching $85.64 in early London trading.
Donald Trump said the US would reinstate its blockade of Iranian shipping in the Gulf, but vowed that the strait would remain open, with or without Iran.
Susannah Streeter, the chief investment strategist at the Wealth Club, said: “Stasis has taken over markets as investors wait for the latest twist in the Iran conflict and brace for higher energy prices to filter through to economies. Brent crude has surged even higher, topping $84 a barrel, while European gas prices have shot up to levels not seen in three months.”
There was a surge in China’s exports last month, lifted by orders for chips and computing power to feed the global AI boom.
Exports climbed 27% from a year earlier measured in US dollars, the biggest rise in four months, according to Chinese customs data. They outpaced May’s 19.4% gain and the 18.2% increase forecast by economists.
This means China is likely to post a trade surplus above $1tn for a second year, despite slowing growth in leading economies and trade frictions with Washington. It is heavily reliant on export sales, to make up for sluggish domestic demand amid a prolonged property crisis.
Imports jumped 36% after May’s 27.4% gain, marking a five-year high. Economists had forecast growth of 24% for June. China posted a trade surplus of $125.6bn in June, up from $105.4bn in May.
The rise in global AI investment is offsetting the export hit from the war in the Middle East.
Xu Tianchen, a senior economist at the Economist Intelligence Unit in Beijing, said: “Continued export strength, mostly driven by AI, points to a better second half, coupled with a more expansionary policy mix, accelerated fiscal spending and mild monetary easing, as well as a de-escalation of the situation in the Middle East, which will benefit China through lower oil prices. But domestic demand remains a drag. Retail sales remain pretty flat and fixed asset investment was negative last month.”
Annual exports accounted for 24% of total manufacturing sales over the first four months of this year, according to a recent report by Gavekal Dragonomics, a consultancy, the highest level since China’s accession to the World Trade Organization in 2001. In 2019, the ratio stood at 18.3%, and rose to 22.3% last year. The report said: “That would be considered high for a small export-focused country; for the world’s second-largest economy, it is remarkable.”
Zhiwei Zhang, the chief economist at Pinpoint Asset Management, told Reuters: “I think exports will remain strong in the second half of the year. Meanwhile, it also puts further pressure on the trade tensions between China and its trading partners, Europe in particular.”
Analysts noted that surging semiconductor prices are pushing up import as well as export values.
Imports from South Korea, a leading chip manufacturer, rose 85% last month, while purchases from Taiwan, another big semiconductor manufacturer, climbed 41.1% over the same period.
Customs vice-minister Wang Jun said he was confident that exports would be resilient into the second half of the year led by technology, despite external pressures.
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