Seoul, Jun 15 (AP/UNB) — The blasts detonated far from the bustling megacities of Asia, but the attack this week on two tankers in the strategic Strait of Hormuz hits at the heart of the region's oil import-dependent economies.
While the violence only directly jolted two countries in the region — one of the targeted ships was operated by a Tokyo-based company, a nearby South Korean-operated vessel helped rescue sailors — it will unnerve major economies throughout Asia.
Officials, analysts and media commentators on Friday hammered home the importance of the Strait of Hormuz for Asia, calling it a crucial lifeline, and there was deep interest in more details about the still-sketchy attack and what the United States and Iran would do in the aftermath.
In the end, whether Asia shrugs it off, as some analysts predict, or its economies shudder as a result, the attack highlights the widespread worries over an extreme reliance on a single strip of water for the oil that fuels much of the region's shared progress.
Here is a look at how Asia is handling rising tensions in a faraway but economically crucial area, compiled by AP reporters from around the world:
WHY ASIA WORRIES
The oil, of course.
Japan, South Korea and China don't have enough of it; the Middle East does, and much of it flows through the narrow Strait of Hormuz.
This could make Asia vulnerable to supply disruptions from U.S.-Iran tensions or violence in the strait.
The attack comes months after Iran threatened to shut down the strait to retaliate against U.S. economic sanctions, which tightened in April when the Trump administration decided to end sanctions exemptions for the five biggest importers of Iranian oil, which included China and U.S. allies South Korea and Japan.
Japan is the world's fourth-largest consumer of oil — after the United States, China and India — and relies on the Middle East for 80% of its crude oil supply. The 2011 Fukushima nuclear disaster led to a dramatic reduction in Japanese nuclear power generation and increased imports of natural gas, crude oil, fuel oil and coal.
In an effort to comply with Washington, Japan says it no longer imports oil from Iran. Officials also say Japanese oil companies are abiding by the embargo because they don't want to be sanctioned. But Japan still gets oil from other Middle East nations using the Strait of Hormuz for transport.
South Korea, the world's fifth largest importer of crude oil, also depends on the Middle East for the vast majority of its supplies.
Last month, South Korea halted its Iranian oil imports as its waivers from U.S. sanctions on Teheran expired, and it has reportedly tried to increase oil imports from other countries such as Qatar and the United States.
China, the world's largest importer of Iranian oil, "understands its growth model is vulnerable to a lack of energy sovereignty," according to market analyst Kyle Rodda of IG, an online trading provider, and has been working over the last several years to diversify its suppliers. That includes looking to Southeast Asia and, increasingly, some oil-producing nations in Africa.
THE GEOGRAPHY AND THE POLITICS
Asia and the Middle East are linked by a flow of oil, much of it coming by sea and dependent on the Strait of Hormuz, which is the passage between the Persian Gulf and the Gulf of Oman.
Iran threatened to close the strait in April. It also appears poised to break a 2015 nuclear deal with world powers, an accord that U.S. President Donald Trump withdrew from last year. The deal saw Tehran agree to limit its enrichment of uranium in exchange for the lifting of crippling sanctions.
For both Japan and South Korea, there is extreme political unease to go along with the economic worries stirred by the violence in the strait.
Both nations want to nurture their relationship with Washington, a major trading partner and military protector. But they also need to keep their economies humming, which requires an easing of tension between Washington and Tehran.
Japan's conservative prime minister, Shinzo Abe, was in Tehran, looking to do just that, when the attack happened.
His limitations in settling the simmering animosity, however, were highlighted by both the timing of the attack and a comment by Iranian Supreme Leader Ayatollah Ali Khamenei, who told Abe that he had nothing to say to Trump.
In Japan, the world's third largest economy, the tanker attack was front-page news.
The Nikkei newspaper, Japan's major business daily, said that if mines are planted in the Strait of Hormuz, "oil trade will be paralyzed." The Tokyo Shimbun newspaper called the Strait of Hormuz Japan's "lifeline."
Although the Japanese economy and industry minister has said there will be no immediate effect on stable energy supplies, the Tokyo Shimbun noted "a possibility that Japanese people's lives will be affected."
South Korea, worried about Middle East instability, has worked to diversify its crude sources since the energy crises of the 1970s and 1980s.
Analysts said it's highly unlikely that Iran would follow through on its threat to close the strait. That's because a closure could also disrupt Iran's exports to China, which has been working with Russia to build pipelines and other infrastructure that would transport oil and gas into China.
For Japan, the attack in the Strait of Hormuz does not represent an imminent threat to Tokyo's oil supply, said Paul Sheldon, chief geopolitical adviser at S&P Global Platts Analytics.
"Our sense is that it's not a crisis yet," he said of the tensions.
Seoul, meanwhile, will likely be able to withstand a modest jump in oil prices unless there's a full-blown military confrontation, Seo Sang-young, an analyst from Seoul-based Kiwoom Securities, said.
"The rise in crude prices could hurt areas like the airlines, chemicals and shipping, but it could also actually benefit some businesses, such as energy companies (including refineries) that produce and export fuel products like gasoline," said Seo, pointing to the diversity of South Korea's industrial lineup. South Korea's shipbuilding industry could also benefit as the rise in oil prices could further boost the growing demand for liquefied natural gas, or LNG, which means more orders for giant tankers that transport such gas.
Tokyo, June 14 (AP/UNB) — Asian shares were mixed Friday as investors weighed a variety of factors, including suspected attacks on two oil tankers in the strategic Strait of Hormuz and lingering worries about trade conflict between the U.S. and China.
Japan's benchmark Nikkei 225 edged up 0.2% to 21,076.11 in morning trading. Australia's S&P/ASX 200 recouped earlier losses to be little changed at 6,543.10. South Korea's Kospi lost nearly 0.2% to 2,099.49. Hong Kong's Hang Seng was little changed but inched down less than 0.1% to 27,294.71. The Shanghai Composite was also little changed but a tad higher at 2,910.74.
Gains in energy and internet companies helped drive stocks broadly higher on Wall Street overnight, snapping a two-day losing streak for the market in an otherwise choppy week of trading.
Investors have been searching for direction as they cautiously await any new developments on the global trade war between the U.S. and China. Any continued escalations could crimp global economic growth and halt what is poised to be the longest economic expansion in U.S. history.
The market is also looking ahead to next week's meeting of policyholders of the U.S. Federal Reserve. Last week, Fed Chair Jerome Powell set off a market rally after he signaled that the central bank is willing to cut interest rates to help stabilize the economy if the trade war between Washington and Beijing starts to crimp growth.
The S&P 500 index rose 11.80 points, or 0.4%, to 2,891.64. The benchmark index has been seesawing this week, opening strong on Monday, and then falling for two straight days before reversing course again on Thursday. The uneven week follows the index's best week of 2019.
The Dow Jones Industrial Average gained 101.94 points, or 0.4%, to 26,106.77. The Nasdaq composite added 44.41 points, or 0.6%, to 7,837.13. The Russell 2000 index of small company stocks climbed 16.01 points, or 1.1%, to 1,535.80.
The suspected attacks in the Strait of Hormuz come amid heightened tensions between the United States and Iran. One third of all oil traded by sea, which amounts to 20% of oil traded worldwide, passes through the strait. The U.S. blamed Iran in what it called a campaign of "escalating tensions" in a region crucial to global energy supplies.
Economists Nicholas Mapa and Prakash Sakpal said in their report for ING that the market tone for the day was "wait and watch."
"Setting the mixed tone for markets today, escalation of geopolitical tensions in the Gulf region counters the positive investor sentiment from rising expectations of the U.S. Fed easing," the report said.
Benchmark U.S. crude dipped 29 cents to $51.99. It rose 2.2% to settle at $52.28 a barrel Thursday. Brent crude oil, the international standard, fell 8 cents to $61.23 a barrel.
The dollar fell to 108.32 Japanese yen from 108.44 yen on Thursday. The euro weakened to $1.1278 from $1.1294.
Tokyo, Jun 12 (AP/UNB) — Shares were mostly lower in Asia on Wednesday and Hong Kong's Seng index tumbled 1.7% as thousands continued protests against proposed legislation that many city residents fear could further erode the territory's legal autonomy.
Renewed jitters over the trade war between the U.S. and China were weighing on sentiment, pulling shares slightly lower on Wall Street, where benchmarks fell for the first time in six days.
Japan's Nikkei 225 index lost 0.2% to 21,154.28 and the Kospi in Seoul shed 0.2% to 2,1087.60. The Shanghai Composite index declined 0.5% to 2,910.82. Australia's S&P ASX 200 edged 0.1% higher 6,550.40. Shares rose in Taiwan but fell in Jakarta and Thailand.
On Wall Street, defense contractors suffered steep declines and technology stocks gave up most of their early gains, taking the steam out of a morning rally. The Dow Jones Industrial Average closed with a loss of 14 points after rising as many as 186 points just after trading began.
The market had rallied for five straight days since the Federal Reserve signaled it is open to cutting interest rates if needed to stabilize the economy rattled by trade disputes. The gains had erased much of the S&P 500's 6.6% decline in May. But Tuesday, concerns that the U.S. trade spat with China could be prolonged and hurt growth in the world's two biggest economies dimmed investor enthusiasm.
Trump told reporters Tuesday he was prepared to expand 25% tariffs already imposed on $250 billion of Chinese exports to cover another $300 billion if a deal with Beijing falls through.
"It's me, right now, that's holding up the deal," Trump said in comments carried by CNBC. "And we're either going to do a great deal with China or we're not doing a deal at all."
Katie Nixon, chief investment officer at Northern Trust Wealth Management, said there is no clear resolution in sight to the trade war and investors will have to get accustomed to uncertainty hanging over the market.
"The market's going to be really sensitive to trade news," she said. "This is going to be very hard to resolve neatly and quickly."
President Donald Trump has said he plans to meet with Chinese President Xi Jinping at the Group of 20 summit late this month in Osaka, Japan. But Trump reiterated Tuesday that if the two can't reach an agreement on trade, he'll proceed with tariffs on $300 billion goods from China that aren't already subject to import taxes.
Defense companies were the biggest decliners in the S&P 500. The market on Monday welcomed news of a megamerger between Raytheon and United Technologies, but the stocks dropped sharply Tuesday. Raytheon lost 5.1% and United Technologies shed 4%. L3 Technologies fell 4.4% and Harris Corp. dropped 4.3%. On Monday, Trump expressed some reservations about the Raytheon-United Technologies tie-up.
Technology stocks also gave up some early gains. Adobe fell 1.6% and Advanced Micro Devices fell 2.5%. The tech sector is still up nearly 24% so far this year, the best performer among the 11 sectors in the S&P 500.
Consumer-focused stocks and internet companies were among the gainers. Facebook rose 1.9% and Verizon gained 1.2%. Walgreens rose 1.1% and Dollar Tree rose 2.7%.
The S&P 500 slipped 1.01 point, or 0.03%, to 2,885.72. The Dow fell 14.17 points, or 0.1%, to 26,048.51. The Nasdaq composite slipped 0.60 of a point to end at 7,822.57. The Russell 2000 index of small companies fell 4.45 points, or 0.3%, to 1,519.11.
The yield on the 10-year Treasury has dropped from around 2.50% in early May to 2.13% Wednesday.
In other trading, benchmark U.S. crude lost 98 cents to $52.29 per barrel in electronic trading on the New York Mercantile Exchange. It rose 1 cent to $53.27 a barrel on Tuesday. Brent crude oil, the international standard, fell $1.03 to $61.26 a barrel.
The dollar fell to 108.36 Japanese yen from 108.52 yen on Friday. The euro rose to $1.1338 from $1.1330.
Tokyo, Jun 11 (AP/UNB) — Asian shares rose Tuesday as investor jitters over trade eased after President Donald Trump suspended plans to impose tariffs on Mexican imports and said he expects to meet with the Chinese leader.
Japan's benchmark Nikkei 225 rose 0.3% to 21,204.28. Australia's S&P/ASX 200 added 1.6% to 6,546.30. South Korea's Kospi gained 0.7% to 2,114.39. Hong Kong's Hang Seng stood at 27,851.68, up nearly 1.0%, while the Shanghai Composite edged up 2.5% at 2,922.00.
On Wall Street, shares continued their winning streak for a fifth day on Monday. That follows the strongest week for stocks since November in what has been a marked turnaround for the market after escalating trade tensions fueled a turbulent skid in May.
During an interview with CNBC, Trump said he expects to meet with Chinese President Xi Jinping at the Group of 20 summit in Japan later this month. That may have given investors some cause for optimism in the dispute between Washington and Beijing.
The S&P 500 index gained 13.39 points, or 0.5%, to 2,886.73. The benchmark index rose 4.4% last week, its best weekly performance of 2019. It's now about 2% below its record set on April 30.
The Dow Jones Industrial Average rose 78.74 points, or 0.3%, to 26,062.68. The Nasdaq composite climbed 81.07 points, or 1.1%, to 7,823.17. The Russell 2000 index of smaller companies gained 9.17 points, or 0.6%, to 1,523.56.
Jingyi Pan, market strategist at IG in Singapore, warned against getting hopes up too much about a resolution on U.S.-China trade issues.
"The seemingly complicated matter of a U.S.-China trade deal appears highly unlikely to be resolved from a high-level meeting between the two presidents," Pan said.
"Given the return of the U.S.-China tariffs threat to the table, look to Asia markets to waffle along."
ENERGY: Benchmark U.S. crude rose 64 cents to $53.90 a barrel. It slid 1.4% to $53.26 a barrel on Monday. Brent crude oil, the international standard, was up 52 cents at $62.81 a barrel.
CURRENCIES: The dollar inched up to 108.61 yen from 108.60 yen on Monday. The euro rose to $1.1320 from $1.1307.
Fukuoka, Jun 8 (AP/UNB) — Finance chiefs of the Group of 20 major economies meeting in the Japanese city of Fukuoka debated Saturday over how to revise tax systems to ensure big companies pay their fair share and support economies as global growth slows.
One aim is to prevent a "race to the bottom" by countries trying to lure companies by offering unsustainably and unfairly low tax rates as an incentive.
Ensuring governments capture a fair share of profits from the massive growth of businesses like Facebook and Amazon has grown in importance over the many years the G-20 finance chiefs have been debating reforms aimed at preventing tax evasion and modernizing policies, as financial markets and businesses have been transformed by technology.
"Everyone, we are now facing a turning point. This could be the biggest reform of the long established international framework in over 100 years," Japanese Finance Minister Taro Aso told the group.
While the officials from both wealthy and developing nations differed over some details, they agreed on the need to get the job done.
"It sounds like we have a strong consensus, and now we deal with the technicalities of how we turn this into reality," U.S. Treasury Secretary Steven Mnuchin said Saturday.
The talks in this bustling port city come just weeks ahead of the June 28-29 summit of G-20 leaders in Osaka, Japan, where President Donald Trump and his Chinese counterpart Xi Jinping are due to meet and possibly work on resolving their bruising standoff over trade and technology.
Mnuchin has been heading trade talks with Beijing along with U.S. Trade Representative Robert Lighthizer. He was due to meet with Yi Gang, governor of China's central bank, in Fukuoka. It was unclear if their meeting might lead to a restart of those talks after weeks of stalemate.
Concern over the potential blow to the world economy from the battle of wills between the two biggest economies has deepened as the Trump administration prepares to expand retaliatory tariff hikes of up to 25% to another $300 billion of Chinese products.
Meanwhile, after a flurry of negotiations, Trump said in a tweet that he would refrain from imposing 5% tariffs on products from Mexico after it "agreed to take strong measures" to stem the flow of Central American migrants into the United States.
"I am pleased to inform you that The United States of America has reached a signed agreement with Mexico," Trump tweeted Friday night, saying the "tariffs scheduled to be implemented by the U.S. on Monday, against Mexico, are hereby indefinitely suspended."
The Trump administration began slapping tariffs on imports of Chinese goods nearly a year ago, accusing Beijing of resorting to predatory tactics to give Chinese companies an edge in advanced technologies such as artificial intelligence, robotics and electric vehicles. These tactics, the U.S. contends, include hacking into U.S. companies' computers to steal trade secrets, forcing foreign companies to hand over sensitive technology in exchange for access to the Chinese market and unfairly subsidizing Chinese tech firms.
Trump has also complained repeatedly about America's huge trade deficit with China — a record $379 billion last year — which he blames on weak and naive negotiating by previous U.S. administrations.
The United States now is imposing 25% taxes on $250 billion in Chinese goods. Beijing has counterpunched by targeting $110 billion worth of American products, focusing on farm goods such as soybeans in a deliberate effort to inflict pain on Trump supporters in the U.S. heartland.
While the tariffs have taken a minor toll on the overall U.S. economy, the uncertainty and slowing demand are rippling across the globe. Earlier this week, the World Bank downgraded its forecast for the global economy in light of trade conflicts, financial strains and unexpectedly sharp slowdowns in wealthier countries.
The weakness has prompted central banks, most recently in Australia and India, to slash interest rates to fend off recession.
A report Friday of a sharp pullback in U.S. hiring for May intensified fears that the economy has weakened and that many employers have grown nervous, in part from trade conflicts. Yet the stock market soared and bond yields fell because it raised hopes that the Federal Reserve might cut interest rates in the coming months, perhaps as early as July, to support the economy.
Japan, hosting the G-20 for the first time since it was founded in 1999, has plumbed the limits of that strategy. The Bank of Japan's policy interest rate has been at minus 0.1% for years, to keep credit cheap, supporting a modest pace of expansion.
As trade conflicts percolate and leaders come and go, the finance chiefs have carried on chipping away at financial reforms and other perennial issues.
Some European members of the G-20, especially, want to see minimum corporate tax rates for big multinationals. Mnuchin said he disagreed with details of some of the proposals but not with the need for action.
"The world has evolved very quickly with new business models," he said. "If we're going to fix this we need it to work for the next 10 years as well."
The finance leaders are also discussing the issue of how developing countries are handling debts incurred through major construction projects, efforts to combat money laundering and to prevent terrorist groups from using cybercurrencies as a source of funding.
They are likely to issue a joint communique to be endorsed at the G-20 summit in Osaka.