freight rates to rise before heading back. Insurers will lower premiums only when freedom of navigation is guaranteed and big operators have been sailing Hormuz for weeks, says Ellis Morley of Howden, an insurance broker. Although Iran has promised no “tolls” for 60 days, it may charge “fees” instead. In April its central bank confirmed receipt of the first revenue from the new Persian Gulf Strait Authority (PGSA). A bill allocating 30% of the proceeds to Iran’s armed forces, including the IRGC, is in parliament. Iran’s recent communications suggest it views managed traffic as the new normal and unrestricted passage as the aberration, says someone familiar with the matter. Yet unless the peace deal lifts American sanctions on the PGSA and the IRGC, anyone paying Iran risks being blacklisted. Supply will, then, stay constrained even after a real truce is reached. On top of that, traders expect America to cancel its next release from emergency stocks, depriving the world of 1m b/d in exports. Demand, which normally rises in the summer, may return faster on news of the war’s end. Morgan Stanley anticipates an oil deficit of 3.4m b/d in the third quarter, draining global stocks at a rate of 2.1m b/d and keeping prices high. The bank forecasts “dated Brent” (oil to be delivered in the next few weeks) will average $90 between July and September and $80 in the three months after. That is $20 more than it predicted in February for the same periods. The prices of refined products are even harder to predict. Asian refiners must wait for Gulf supplies to arrive. In the Gulf itself, Iranian strikes have damaged big refineries. Further delays to product shipments could drain stocks in Africa (starved of petrol), Asia (a big importer of naphtha, a plastics feedstock, and LPG, a cooking fuel) and Europe (reliant on Gulf jet fuel and diesel). American refiners may swing from producing diesel and jet fuel for export back to petrol for the home market—but domestic stocks are so low that prices at the pump may stay high, or even rise.

On June 17th the International Energy Agency, an official forecaster, said it was expecting an oil glut next year, as the Middle East starts pumping more and newly active producers elsewhere do not stop. But global oil stocks may hit record lows before then (see chart 3). If governments decide to refill their strategic reserves—or, for those without such stocks, to build them—this may add 2m b/d to global demand in 2027. China, which has cut crude imports by 5m b/d—roughly 5% of global supply—may be first in line. And even if supply does start to outstrip demand, the risk that Iran reasserts control over Hormuz—or that the fighting resumes—may add a lasting premium of up to $10 a barrel to world oil prices, reckons Rystad Energy, a consultancy. For energy markets, the end of the war does not mean the end of uncertainty. ■ For more expert analysis of the biggest stories in economics, finance and markets, sign up to Money Talks, our weekly subscriber-only newsletter. This article was downloaded by zlibrary from https://www.economist.com//finance-and-economics/2026/06/16/deal-or-no-deal-oil- prices-will-stay-volatile-for-months

Finance & economics | Life after zero A new golden age for Japanese banks comes with a catch Smaller lenders are saddled with low-return bonds they cannot sell June 18th 2026 FOR nearly 31 years, as Japan struggled with low growth and bouts of deflation, its benchmark interest rate began with a zero, sometimes with a minus in front of it. So the decision by the Bank of Japan (BoJ) on June 16th to raise it from 0.75% to 1% carried symbolic weight. Few Japanese businesses are happier to see the back of zero than banks, whose balance- sheets are reviving after three decades of punishing strain. Since the BoJ started raising rates in March 2024 the index of Japanese bank shares has more than doubled, far outpacing the broader stock market (see chart 1). Banks borrow money from depositors at short-term rates (set by the BoJ) and lend to borrowers at long-term ones (determined by the bond market). In

a zero-rate world they could pay depositors next to nothing but eked out little more from reluctant borrowers. “Net interest margins”, which reflect the difference between interest income and interest expenses, languished. So did banks’ profits. Today the gap between short-term and long-term rates is up from near zero to 1.6 percentage points. That should be great news for lenders. And it is—if they are big. Net interest income at Japan’s three mega-banks—MUFG, SMBC and Mizuho—has increased by a third on average since 2024 (see chart 2). They expect record profits this year. Small banks, though, continue to struggle. And their balance-sheets may be storing up trouble for the banking system as a whole. Between 2022 and 2025 the share prices of the smallest fifth of Japanese banks by assets rose by half as much as those of the largest three-fifths. In part, that is because banking is about scale. Bigger banks can use their vast balance-sheets to squeeze more profit out of the same net interest margin, while diversifying risks. They can spread fixed costs on things like technology over more assets. Smaller Japanese banks, by contrast, tend to spend a higher share of revenue on overheads and carry more non- performing loans, according to Ito Naoki of Verdad, an asset manager.

Japan’s 61 regional banks are also struggling to attract deposits. These have grown by just 6% since 2022, compared with 17% for mega-rivals better able to roll out whizzy digital-banking features and stock-brokerage offerings to take advantage of new tax-advantaged investment accounts. A bigger problem for small lenders is dealing with their share of the ¥150trn ($936bn) in domestic bonds held by banks. Bought when interest rates were low, many of these are trading below face value. Big lenders can absorb their large absolute losses with relative ease, especially now that their profits are rising again. Smaller banks have no such luck. Losses on yen bonds amount to 2% or so of risk-weighted assets at the regional banks and 4% at the 250 or so shinkin community banks, the BoJ found earlier this year. Given that banks are generally advised to hold a capital cushion of around 10% of their risk-weighted assets, this is troubling. One way of dealing with the stress is to link up. In May Aichi and San ju San, two regional banks, agreed to a ¥12trn merger, the latest in a string of them. A more dubious method involves creative accounting. The share of banks’ holdings of long-dated Japanese government bonds marked as “held to maturity” rather than “available for sale” rose from zero in 2019 to nearly half in 2025, reckons AMRO, a think-tank.

On paper, this locks in both the low yields and the principal, reducing the interest-rate sensitivity of a bank’s portfolio. In practice, it can bury risks that imperil a banking system. This nearly happened in America in 2023 after regional banks sitting on unrealised bond losses failed. One, Silvergate Capital, sold bonds marked as “held to maturity” to improve liquidity. Critics accused another, Silicon Valley Bank (SVB), of using similar designations to hide losses from rising interest rates that would have wiped out its capital. For now Japan’s regional banks look sturdier than Silvergate or SVB. The BoJ estimates that absorbing unrealised losses on their securities holdings would still leave them with ample capital, in part thanks to their profitable investments in stocks. But some smaller lenders will almost certainly come under pressure, especially in regions where Japan’s ageing population is declining fastest—and with it the banks’ deposit base. The faster Japan puts the zero-rate era behind it, the sooner this reckoning will come. ■ For more expert analysis of the biggest stories in economics, finance and markets, sign up to Money Talks, our weekly subscriber-only newsletter. This article was downloaded by zlibrary from https://www.economist.com//finance-and-economics/2026/06/18/a-new-golden-age-for- japanese-banks-comes-with-a-catch

Finance & economics | The Donroe dividend Does Donald Trump make Latin America a good bet? Nowhere in the developing world has done so well out of the past year June 18th 2026 FOR AMERICA’S neighbours, Donald Trump’s second term has been unsettling. As well as disrupting trade and sending energy prices soaring— bad news almost wherever you are—Mr Trump is determined to impose his will on the western hemisphere. He has kidnapped the leader of Venezuela, sent gunboats to the Caribbean and threatened to invade Cuba. Yet Latin America is also benefitting from Trumpian chaos. In 2025, Mr Trump’s first year back in office, foreign direct investment (FDI) rose to an estimated $204bn, reversing a recent decline (see chart 1), while flows to the rest of the developing world shrank. Mergers and acquisitions (M&A) were up by nearly half. An index tracking Latin American stock markets from

MSCI, which compiles such things, has risen by 60% since the start of 2025, beating emerging markets as a whole for most of that period (see chart 2). It helps that Latin America is no longer a place of unstable currencies and spiralling inflation. All 33 countries south of the Rio Grande, save Argentina and Bolivia, float their currencies or peg them to the dollar. Inflation- targeting central banks and fiscal reforms have slowly lured investors. Between 2005 and 2019 the region’s GDP grew, on average, by a steady 2.8% a year. Pharmaceuticals, fintech and mining have all attracted foreign money. That is not wholly coincidental. Mr Trump believes that America should have closer economic ties with places it wants to influence. Latin America, investors reckon, tops the list. To take the most brazen example, in October his Treasury extended a $20bn swap line to Argentina to help Javier Milei, the president and a Trump ally. American officials say that alternative sources of finance are necessary to dilute China’s influence. Latin America has lots of sought-after minerals, including more than a third of the world’s proven reserves of copper and many of the most viable deposits of rare earths. It also exports more oil than it imports.