Author: IntaCapital Swiss

Crude Oil Shipments Increasing From The Persian Gulf

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8th July 2026

Crude oil flows through the Strait of Hormuz are rapidly rebounding as Persian Gulf exporters ramp up production with Kuwait leading the way followed by Saudi Arabia and Iraq also boosting output as shipping restrictions have become more relaxed. As the blockading of the Strait of Hormuz is easing trapped tankers have exited the Persian Gulf via the passage and loading operations have resumed at major hubs such as Saudi Arabia’s Ras Tanura terminal. Indeed, data reveals that oil output last month was the lowest from OPEC and OPEC+* since the year 2000, and also below levels during the 2020 Covid-19 pandemic when demand collapsed.

OPEC (Organisation of the Petroleum Exporting Nations) and is a coalition of 23 oil producing countries of which the full members are Algeria, Equatorial Guinea, Gabon, Iran, Iraq, Kuwait, Libya, Nigeria, Republic of the Congo, Saudi Arabia, United Arab Emirates and Venezuela. There are a further 10 non-OPEC Partner Countries that form the OPEC+ and make up the DoC (Declaration of Cooperation) and consists of Azerbaijan, Bahrain, Brunei, Kazakhstan, Malaysia, Mexico, Oman, Russia, South Sudan and Sudan. The whole group’s modus operandi is to cooperate to influence the global oil market and stabilise prices.

Yesterday, with both Saudi Arabia and Russia taking the lead, OPEC+ agreed via a video conference to add 188,000 bpd (barrels per day) to their current output target, and this is in keeping with their decision two years ago to reverse output curbs. In theory they have added 940,00 bpd (equivalent of 1% of global demand) since the war began but the closure of the Strait of Hormuz nullifies that figure, and since oil has started flowing through the Strait of Hormuz, figures released suggest it has helped to drive a surplus in Asian markets.

Over the years data shows that Asia is the biggest importer of Middle Eastern crude oil and analysts advise that Asian refineries are now well supplied to the extent that as supply ramps up from the Persian Gulf these Asian refiners are pushing some oil supplies to distant destinations such as California in the United States. Indeed, Ex UAE grades are now being offered to the West Coast of the United States and if contracts are agreed it will be the first time since 2018 that oil from the Middle East has arrived at these destinations.

In the commodities market, oil futures have fallen drastically from their peak of $126.31 during the current United States/Iran/Israel conflict to circa $72per/bl. Analysts advise that tanker tracking data shows that since the Strait of Hormuz has reopened due to the current peace accord, both the UAE and Saudi Arabia have restored shipments/exports to near pre-conflict levels. Experts advise that oil flows via the Strait of Hormuz have recovered to circa 10 million bpd but still well below the pre-war average of 18 – 19 million bpd.

The clock is ticking on the Islamabad Memorandum of Understanding; a 14 point preliminary peace agreement signed on 17th June 2026 establishing a 60 day ceasefire after 109 days of hostilities. The deal is under severe strain at the moment despite the usual positive rhetoric emanating from the White House as outbreaks of fighting and continued disagreement on the nuclear front regarding Iranian enrichment. It is hoped that the accord will soon grow into a fully signed peace agreement and the world will hold its breath as it really cannot afford another energy shock so soon after the last one.

Top strategies for business funding in 2026

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The franchise model remains a highly structured route to business growth and asset ownership. By combining a replication-ready operating blueprint with a recognised brand identity, franchising can lower some of the entry barriers that face independent corporate startups.

However, navigating the capital markets to finance a franchise requires deep credit discipline. While high-street banks continue to serve as a baseline source of leverage, their underlying risk models are tightly controlled. Concurrently, the growth of non-bank financial institutions (NBFIs) and direct private credit networks has diversified how corporate operators structure their liabilities.

Whether you are looking to acquire an initial territory, fund a mandatory physical upgrade, or execute a multi-unit consolidation, securing capital depends on choosing a targeted mix of standard financial instruments.

1. Commercial bank franchising units and criteria

Traditional commercial banks remain one of the most cost-effective sources of senior structural debt, provided the applicant meets standard risk benchmarks. Many tier-one banking institutions manage dedicated franchise segments or specialised credit committees that assess these applications.

The realities of bank underwriting:

While some banks maintain internal lists of established, historically stable franchise networks to streamline the initial review process, inclusion on a list does not guarantee an approved loan. Underwriters do not rely on rigid, automated leverage brackets; instead, debt-to-equity ratios are fluid and determined case-by-case.

For highly established franchise systems with strong historical performance, banks may offer favorable loan-to-cost terms. However, for emerging, regional, or unproven brands, banks typically require significantly higher personal equity injections, strict secondary collateral, or comprehensive personal guarantees.

2. Deploying asset finance to manage cash flow

Franchise models—particularly in the logistics, quick-service restaurant (QSR), light manufacturing, and commercial cleaning sectors—are asset-heavy, requiring substantial investment in physical infrastructure, specialised machinery, or vehicle fleets. Purchasing these depreciating assets outright using cash reserves can create severe working capital constraints during the critical operational setup phase.

How it works:

Corporate operators frequently isolate their capital expenditure requirements from their primary commercial loans by utilising standard asset finance mechanisms, such as asset leasing or hire purchase agreements.

Because the underlying machinery, vehicle, or equipment serves as the direct security for the extension of credit, the underwriting parameters are structurally separate from a general corporate facility. This preservation of liquidity allows management to keep cash reserves available for day-to-day operational expenses, inventory cycles, and local marketing.

3. The function of private credit and direct lending

The corporate loan market has experienced a significant influx of capital via direct private credit funds. For franchise groups that do not align with the standard parameters of commercial bank lending—such as cross-border expansion, multi-unit acquisitions, or systems with seasonal revenue distributions—non-bank direct lenders offer alternative execution.

How it works:

Mainstream private debt funds operate outside the strict, macroprudential capital adequacy rules that govern regulated bank balance sheets. Rather than focusing exclusively on historical balance sheet ratios, private underwriters emphasize forward-looking cash flow projections, stable debt service coverage ratios (DSCR), and the overarching economic resilience of the franchise ecosystem.

A note on private capital costs: It is critical to recognise that direct private credit and alternative non-bank funding structures carry a significantly higher cost of capital than traditional bank lending. Enterprises utilise this path because they are trading a premium interest margin for faster underwriting execution, custom covenant structures, and greater flexibility during the build-out phase.

4. Multi-unit syndication and private placements

As corporate franchising trends toward scale, multi-unit ownership has become a primary vehicle for institutional investors. Scaling rapidly across multiple territories requires an aggressive deployment of capital that can test the single borrowing limits of an individual operator.

How it works:

To build a resilient capital structure, sophisticated operators frequently partner with corporate finance advisors to structure private placements or localised investor syndicates. Allocating capital toward these systems has increasingly become a priority for institutional firms managing private equity alternative investments.

Pooling equity capital allows operators to approach institutional lenders from a position of enhanced financial strength. Lenders typically view multi-unit corporate groups favorably, as operating across multiple geographic territories spreads localised economic risk and diversifies the underlying revenue streams.

Preparing the franchise for underwriting due diligence

Regardless of whether you pursue traditional bank debt, asset leasing, or direct private credit, alternative lenders evaluate files based on risk mitigation and concrete forecasting. To ensure your franchise is positioned successfully for premium funding terms, your financial dossier must prioritise three core elements:

  • Transparent, granular forecasts: Avoid relying solely on generic financial models provided by a franchisor. Underwriters require independent, localised three-year profit and loss (P&L) and cash-flow projections built from verified, comparable trading data.
  • Rigorous sensitivity modeling: Your business plan must explicitly demonstrate how your debt service coverage ratio performs under stress scenarios, such as a 15% or 25% contraction in baseline consumer demand.
  • Structural legal alignment: Ensure your financing parameters map perfectly to your franchise agreement. Clauses regarding secondary borrowing, transfer rights, and operational controls must be fully vetted by specialised legal counsel to prevent structural defaults between your lender and the franchisor.

The verdict

Securing the best financial structure for a franchise business requires a balanced, multi-channel approach. High-velocity transactional needs and short-term capital gaps are efficiently managed via flexible alternative funding for small business platforms and FinTech liquidity tools. Meanwhile, standard, low-cost relationship debt continues to be anchored by traditional banking groups.

However, when standard bank lines are constrained by rigid underwriting boxes, or when a rapid multi-unit expansion requires complex financial engineering, utilising alternative business funding options—such as direct private credit, structured asset facilities, and specialised intermediaries—provides the precise leverage needed to scale efficiently without compromising corporate liquidity.

To discover how our specialised finance experts can help your business evaluate alternative funding options and navigate today’s complex credit landscape, explore the latest insights from IntaCapital Swiss. Contact us today.

Alternative funding options if your SBA loan is denied

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For many small and medium-sized enterprises (SMEs), securing a Small Business Administration (SBA) loan, such as the 7(a) or 504 programmes, is viewed as a highly desirable route for capital acquisition. Backed by government guarantees, these loans offer competitive interest rates and long repayment terms.

However, the underwriting process is famously rigorous. Because SBA loans are administered through traditional commercial banks and authorised lenders, they are subject to strict credit, collateral, and cash flow guidelines. If a business falls short on strict collateral thresholds, debt service coverage ratios (DSCR), or historical revenue metrics, receiving a denial letter can bring expansion plans to an abrupt halt.

If your primary SBA loan has been denied, it does not mean your business is unfinanceable. The lending landscape offers a variety of paths, ranging from alternative bank-style lending to non-bank financial channels. Navigating these alternative business funding options requires understanding why the denial occurred and matching your company’s specific financial profile to the right structure.

The first step: Reassessing bank-style lending

An SBA loan denial is often a verdict on how well you fit a specific government-backed underwriting model, rather than a final judgment on your business’s creditworthiness. Before stepping completely away from regulated banking institutions, consider these mainstream alternatives:

  • Conventional commercial loans: Traditional banks and credit unions frequently offer standard commercial term loans or lines of credit outside of the SBA framework. If your denial was caused by an SBA-specific eligibility rule, such as strict exit requirements for business acquisitions or rigid down payment rules, a conventional bank loan may provide the flexibility you need.
  • SBA micro-loans and community preferred lenders: If you applied for a large 7(a) loan and were turned down due to insufficient collateral or a shorter time in business, smaller microloan programmes (capped at $50,000) or local community banks often operate with more flexible, localised underwriting criteria.

Mainstream non-bank alternative options

If traditional banking constraints mean a bank loan is entirely out of reach, a robust ecosystem of alternative funding for small business operations exists. These options shift the underwriting focus away from rigid historical ratios and toward specific operational assets.

1. Asset-based lending (ABL)

An SBA loan denial frequently stems from a lack of standard real estate collateral. Asset-based lending flips the underwriting focus by securing capital against the liquid and tangible assets already held on your balance sheet.

  • How it works: ABL facilities allow you to leverage specific corporate assets, such as machinery, equipment, high-value inventory, or verified purchase orders, to secure revolving lines of credit or term loans.
  • The application: Because the loan is directly tied to the liquidated value of the underlying assets, it represents a lower risk profile to alternative lenders, making it viable for companies with asset-heavy balance sheets but lower credit scores.

2. Invoice factoring and receivables financing

If your capital shortfall is driven by immediate working capital bottlenecks rather than long-term expansion needs, utilising your unpaid B2B invoices can unlock immediate liquidity.

  • How it works: An invoice finance provider advances a significant percentage (typically 80% to 90%) of your outstanding accounts receivable ledger. The remainder is released, minus the funder’s fee, once your corporate client settles the invoice.
  • The application: Underwriting is based primarily on the creditworthiness and financial health of your corporate customers, not your own financial history, making it an agile tool for managing seasonal or lumpy revenue cycles.

3. Institutional direct lending and private credit

For larger mid-market firms looking for growth and expansion capital, direct lending via institutional private credit funds has become a primary alternative to commercial bank debt.

  • How it works: Private debt funds evaluate a business’s forward-looking cash flow, enterprise value, and overall leverage. While private lenders maintain strict underwriting standards regarding exit risk and debt service capabilities, they operate outside the rigid regulatory constraints of commercial banking groups, allowing for more customised repayment structures.

Evaluating specialist structuring and intermediaries

For middle-market firms managing complex corporate capital structures or cross-border trade, standard online alternative lenders may not be sufficient. In these scenarios, businesses often work alongside corporate finance advisors or specialised boutique finance firms to structure alternative arrangements.

These specialists can assist in navigating specialised financial instruments, such as:

  • Customised trade finance: Structuring traditional Letters of Credit (LC) and standby letters of credit (SBLC) directly backed by standard transactional collateral to support international supply chains.
  • Private debt placements: Sourcing and structuring tailor-made debt packages with private funds that fall outside standard commercial banking models.

A note on capital costs: It is critical to recognise that alternative financial structures, direct lending channels, and specialised private debt placements carry a significantly higher cost of capital than government-subsidised lending schemes. Corporate treasurers must perform a clear cost-benefit analysis to ensure project margins fully justify the higher interest rates or structuring fees.

Performing due diligence in alternative markets

Because the alternative finance and private debt space is less centralised than traditional banking, performing thorough due diligence on your funding partners and platforms is essential to mitigate the risk of mis-selling or opaque contract terms. When evaluating any non-bank provider, ensure they meet standard institutional criteria:

  • Transparent cost profiles: Legitimate alternative providers will clearly outline underwriting fees, legal costs, and effective interest margins upfront. Request a full fee schedule and calculate the total cost of capital before execution.
  • Verified regulatory standing: Proximity to a respected financial center (such as London or Switzerland) does not automatically guarantee safety. Ensure that any firm or intermediary you engage with is properly licensed, registered, and actively supervised by relevant financial conduct authorities (such as the FCA in the UK or FINMA in Switzerland).
  • Clear lender identity: Ensure you understand exactly who is funding the loan and what covenants are attached to the capital to protect your corporate stability and asset integrity.

The verdict

An SBA loan denial is a pivot point that requires a careful analysis of why the application was rejected. If the fundamentals of your business are strong but simply fall outside a traditional bank’s risk box, conventional bank alternatives or localized microloans may still be within reach.

However, if speed, flexibility, or non-standard asset structures are the primary constraints, turning to a balanced mix of asset-based lending, invoice finance, or direct private credit can provide the necessary liquidity. Working with a specialised corporate finance partner can help you successfully navigate these alternative markets, ensuring your capital structure remains robust, compliant, and aligned with your long-term objectives.

To discover how our specialised finance experts can help your business evaluate alternative funding options and navigate today’s complex credit landscape, explore the latest insights from IntaCapital Swiss. Contact us today.

Which platforms are most trusted* for managing business funding options?

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The architecture of corporate finance is continuously evolving. For decades, when a mid-market enterprise or a corporate borrower required expansion capital, structured project finance, or trade facilities, the primary gateway was a traditional commercial bank.

Today, the funding landscape is far more diversified. While traditional commercial banking groups remain the dominant force for standard, cost-effective corporate credit, a combination of evolving capital adequacy rules (such as Basel III) and shifting market dynamics has given rise to a robust alternative financing ecosystem.

For corporate treasurers, CFOs, and business owners, managing these alternative business funding options is no longer about choosing one exclusive path. Instead, it requires understanding how traditional bank debt, institutional private credit, digital fintech tools, and specialised boutique intermediaries can work together to meet specific liquidity needs.

1. Commercial banking groups (The anchor of low-cost structural capital)

Despite the rise of alternative financing, established commercial and investment banks remain the bedrock of corporate funding. For stable companies with strong credit histories, major banking institutions regularly facilitate complex structured finance, syndication, trade finance, and large-scale project finance – often at a significantly lower cost of capital than alternative markets.

When they are used:

Banks utilise a combination of sophisticated financial modeling and relationship-driven underwriting. They are the ideal choice for long-term, predictable capital requirements. However, their strict regulatory oversight means their onboarding and underwriting processes can be lengthy, and their risk appetite for non-standard assets or rapid turnarounds is inherently limited.

2. Institutional private credit & asset-based lenders

When a transaction falls outside a traditional bank’s risk framework or requires faster execution, direct lending via institutional private credit funds (such as industry giants like Ares, Blackstone, or specialised credit managers) has become a primary alternative.

Alongside these funds are dedicated asset-based lenders and invoice finance providers who specialise in unlocking working capital tied up in receivables, inventory, or machinery.

How they are managed:

Corporate borrowers frequently access these networks via digital B2B marketplaces (like SS&C Intralinks or Dealsuite) that act as secured deal rooms, or through corporate finance advisors who map out the company’s capital structure to match the right institutional fund.

3. Specialist financial intermediaries and boutiques

Boutique financial firms and independent corporate finance advisors occupy a specific niche in the market. They do not replace commercial banks or massive private equity funds; rather, they serve as specialised intermediaries for businesses facing complex financing scenarios or cross-border trade bottlenecks.

Boutiques are often brought in to arrange specialist financial instruments, such as:

  • Traditional trade finance: Structuring letters of credit (LC) and standby letters of credit (SBLC) directly backed by standard transactional collateral.
  • Alternative capital sourcing: Accessing private debt placements or specialised funding lines when a company’s balance sheet doesn’t fit standard banking models.
  • Collateral structuring: Navigating high-level alternative instruments, such as collateral transfer facilities, as specific, high-end mechanisms to temporarily secure credit lines.

A note on specialist instruments: Alternative financial structures, such as collateral transfer or specialised private debt placements, are highly sophisticated tools. They typically carry a higher cost of capital than traditional bank lending and require rigorous legal and financial due diligence to ensure appropriate risk management and regulatory compliance.

4. FinTech and digital liquidity platforms

For day-to-day liquidity and operational velocity, business financial technology platforms have become standard treasury tools. Platforms like Revolut Business, Airwallex, or Wise excel at cross-border cash management and multi-currency transactions, while embedded finance providers offer quick, revenue-based working capital lines.

While these tools are highly effective at providing flexible alternative funding for small business operations and fast-growth startups, they are fundamentally designed for short-term agility. FinTech platforms offer unmatched speed and transparency for transactional workflows, but they are rarely built to replace long-term, structural project capital.

Evaluating trust and legitimacy in alternative markets

Because the alternative finance and private debt space is less centralised than traditional banking, performing thorough due diligence on your funding partners and platforms is essential to mitigate the risk of mis-selling or opaque contract terms.

When assessing any platform, advisory, or intermediary, ensure they meet these standard institutional criteria:

  • Transparent cost profiles: Legitimate alternative providers are fully transparent about underwriting fees, legal costs, and interest margins upfront. Alternative finance is traditionally more expensive than bank debt; a credible partner will clearly outline the cost-benefit analysis.
  • Verified regulatory standing: Proximity to a respected financial center (such as Switzerland or London) does not automatically guarantee safety. Ensure that any firm you engage with is properly licensed, registered, and actively supervised by relevant financial conduct authorities (such as FINMA in Switzerland or the FCA in the UK).
  • Proven execution history: Avoid vague marketing claims regarding secret private networks. Trust is earned through a verifiable track record of navigating complex macroeconomic cycles and successfully executing structured deals.

The verdict

Managing modern business funding options requires a balanced, multi-channel approach. For high-velocity, transactional workflows, FinTech platforms provide the necessary digital infrastructure. For low-cost, established, and large-scale funding, commercial banks remain the premier choice.

However, when standard avenues are constrained, or a transaction requires bespoke financial structuring, working with a specialist boutique financial partner can help navigate alternative markets, access direct private credit, and structure compliant solutions tailored to your firm’s unique objectives.

To discover how our specialized finance experts can help your business evaluate alternative funding options and navigate today’s complex credit landscape, explore the latest insights from IntaCapital Swiss. Contact us today. 

*”Trusted” refers to funding channels and intermediaries evaluated on their regulatory compliance, data security, and transparency. Alternative finance structures often carry a higher cost of capital than traditional bank lending and require independent financial due diligence. This content does not constitute formal financial advice.

What Will Happen to the UK’s Economy if Great Britain Rejoins the European Union?

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Ten years ago, on the 23rd June 2016, Great Britain voted by 51.89% to 48.11% to leave the European Union (EU), and Brexit* became official. Shortly after, the Prime Minister David Cameron, a leading voice for staying in the Union, resigned from the office. However, the politics of Brexit are changing, with polls revealing a majority of the UK population wish to return to the EU, along with many politicians, who are openly voicing their commitment to re-establishing closer bonds with the EU if not returning. 

However, experts confirm that the United Kingdom’s former partners across the English Channel have made life as difficult as possible for companies in the UK doing business with them, and no doubt re-entering the bloc would not be an easy task. A number of expert analysts within this arena have said that even if the UK were to undergo a full partnership status, reversing everything Brexit stood for, it would restore only just over 50% of lost output that was lost by leaving the EU. 

Experts suggest that a plus for the UK economy would be from joining the single market for goods, though Brussels has already rejected this option out of hand. Other possibilities include a Switzerland-style agreement based on a tailor-made package of interlocking trade deals, or rejoining the EU Customs Union to secure tariff-free trade. However, the recently resigned UK Prime Minister, Keir Starmer, has repeatedly confirmed that the government will not pursue the “red line” freedom of movement, a customs union with Brussels, or single market access.

However, despite his recent rhetoric, the Prime Minister in waiting, Andy Burnham, according to experts, is an ardent anti-Brexiteer. As Keir Starmer’s government had begun to test the aforementioned red lines, it will be interesting to see where the labour government will go under his leadership. Indeed, officials in the UK have recently promoted legislation that experts suggest could be steps towards a Swiss style arrangement, with Brussels under the auspices or process known as “Dynamic alignment”*. This process allows the UK to adopt new EU regulations without a vote in parliament let alone being put to the country as a whole.

*Dynamic alignment – Is heavily tied to UK – EU trade and border arrangements and in the context of the United Kingdom, this is a legal and regulatory mechanism where the UK agrees to keep its domestic laws and standards continuously updated to match EU regulations. Unlike a static agreement where the EU and UK would have to renegotiate every time a new rule is introduced, rules automatically adapt as EU rules evolve under dynamic alignment.

*It is designed to ensure a level playing field for trade and allow goods such as agri-food products and electricity to cross UK – EU borders with minimal friction. Interestingly and ironically, the Brexit supporting policies of former Prime Minister Boris Johnson controversially used/invoked dynamic alignment in 2019 to speed up the process of the UK’s withdrawal from Europe. 

Few can deny that over the last decade, Brexit has cost Britain. For the first sixteen years since 2000, the economy of the UK grew faster than France, Spain and Italy. However, according to data released from the UK’s ONS (Office of National Statistics), growth for the last eight years in the UK has been slower than France and half as fast as Spain and Italy. Many studies on growth have varied widely from a loss of 1.00% up to 8.00% with the BOE (Bank of England) pitching in at circa 3.50%. Indeed, trade with Europe had been on an upward trend before 2016, official data released show that compared with 2019, in 2025 imports from the EU were down 10% and exports were down 14%.

Some experts argue that rejoining the customs union or going for a Swiss-type deal will reduce some trade frictions, but the economic benefits will be much smaller. A full Brexit reset i.e., rejoining the EU as a full member they argue, would give a long-term boost to the economy reversing the estimated 2.00% – 8.00% loss in GDP (other estimates are a recovery of 50% of losses), remove all non-tariff trade barriers, massively boost business investment, and eliminate customs paperwork. Furthermore, analysts advise that over the long-term the UK should be able to recoup much of the £30 Billion in lost tax revenue since leaving the EU. 

Rejoining the EU as a full member would require the UK to abandon all of its strict “red lines.” It would mean accepting single market access, the customs union, and the free movement of people across reopened borders. However, this could be a very tough sell politically, especially given the current public and political backlash in the UK surrounding immigration and border control.

Furthermore, experts argue the UK would have to ditch the pound in favour of the Euro, which Gordon Brown, the Chancellor of the Exchequer in the era of the Blair Labour government fought very hard for the UK to keep. The UK would have to adopt all EU laws, rules and regulations, and once again would have to kowtow to Brussels on a regular basis. Although the UK had previously negotiated a free membership fee of the EU, this time around the country would have to pay an estimated gross annual membership fee of £22 billion to £31 billion.

Are Chinese Bonds A Safe Haven?

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It is well documented that in times of geopolitical crisis and economic upheaval, investors flee to safe havens such as gold, Switzerland and U.S. treasuries (U.S. Government Bonds). However, during the recent United States/Iran/Israel conflict, Chinese Government Bonds (CGBs) have emerged as a surprising safe haven where global asset managers have been adding these bonds to their portfolios. 

Interestingly, investors have not been attracted by yields but by their virtual non-correlation with markets in the west. Indeed, since March, analysts advise that in Japan, Europe, the US, yields have soared between circa 35 – 60 BPS (Basis Points) as investors sold government bonds, whereas yields on CGBs have declined by 8bps. 

Real money investors* have been attracted by the price stability of CBGs where there are being offered a preservation mandate as a counter balance to high-yielding riskier assets on portfolios. Indeed, during the current conflict, many asset managers reviewed their portfolios and bought into CGBs despite Chinese yields being pushed to the lowest in the market except for Japan and Switzerland. 

*Real money investors — These are institutional investors such as asset managers, sovereign wealth funds, pension funds, insurance companies and traditional mutual funds who invest on an unleveraged basis. This is in direct contrast to what is generally referred to as ‘fast money investors’, such as hedge funds who are highly leveraged and trade heavily on debt, and further rely on short-term trading strategies and derivatives to amplify returns.

The world has seen energy prices go through the roof since the start of the Middle East conflict on the 28th February this year resulting in inflation problems for many major economies. This has had a negative effect on government bonds, especially those bonds from Europe and the United States being held by investors, whilst bonds issued by the government of China have remained relatively inflation free. 

Unlike many other countries, China holds significant reserves of energy, and as a result did not suffer an immediate supply shock, which resulted in domestic inflation remaining subdued. Further positive effects on inflation have been helped by a dovish monetary policy stance by China’s central bank, the People’s Bank of China (PBOC), which has resulted in a calm, low volatility, government bond market.

Experts have said that key drivers driving renewed foreign investment interest are the near zero-correlation to western markets and low volatility. In contrast, U.S. treasuries have been caught between competing forces where inflation expectations have seen treasuries go up, and safe haven demand has seen them go down — resulting in unpredictability for portfolio managers.

However, contrary to western financial markets, analysts advise that there are certain risks involved when investing in the Chinese bond markets, or China as a whole, as they operate under rules that differ from those found in Europe or the United States. For example, the dovish monetary stance by the PBOC may not last forever, resulting in a differing dynamic for government bonds. China’s capital controls could result in getting investments out of China, a difficult proposition, and  geopolitical tensions between the west and China could possibly lead to sanctions making investments difficult to repatriate.

On the currency front, experts in this arena advise that increasing foreign capital inflows into China might place the Chinese Yuan under upward pressure and reduce the foreign currency values of inward investments in China. However, there appears to be a large shift in trust towards the Chinese bond market, as some experts and analysts advise that China is no longer seen as uninvestable, and no doubt all potential risks have been scrutinised by all the relative institutions risk management and compliance teams.

How Will the Re-Opening of the Strait of Hormuz Affect Consumers?

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The United States and Iran signed a 14 point MOU (Memorandum of Understanding) on Wednesday June 17th, 2026, which triggered the continuation of the 60-day negotiation window, allowing the toll-free re-opening of the Strait of Hormuz, with the US lifting its naval blockade of Iranian ports. Iran has reaffirmed its commitment not to procure or develop nuclear weapons, and has agreed to allow UN nuclear inspectors of the IAEA (International Atomic Energy Agency) back into the country.

Recently, analysts advised that millions of barrels of crude oil have been seen passing through the Strait of Hormuz with more ships and tankers signalling their intention to traverse the strait. The United States/Iran/Israel conflict saw Brent Crude spike in excess of $120p/bl (pre-conflict just under $73pbl), and recently, the price is sitting at circa $77.28p/bl. The drop in price is not only due to the re-opening of the Strait of Hormuz, but also due to slowing global demand and record production outside of OPEC.

However, households and other consumers should not celebrate just yet, as experts estimate that the initial energy shock from the conflict could see inflation increasing in Q3 of this year and remain elevated into 2027. According to analysts at Rystad Energy, exports of oil from the Persian Gulf could take until 2027 to reach pre-crisis levels and that is only if the agreement holds. Indeed, some analysts advise that it will take three months for 70% – 85% of lost production to resume, which will also rely heavily on spare capacity in Saudi Arabia and for the UAE (United Arab Emirates) to ramp up quickly once pipelines are clear. Analysts further advised that the timescale to reach 90% of pre-conflict volumes is up until 2028 or longer to reach full capacity, or longer for those facilities damaged during the war.

Therefore, consumers will find prices at the pumps for diesel and petrol remaining elevated for some time as will the cost of electricity. Gas prices may remain elevated for longer as experts advise it will take extended time to repair Persian Gulf LNG (Liquid Natural Gas) complexes such as Qatar, where it will take from three to five years to repair their damaged gas facilities at the Ras Laffan LNG complex.

The Bank of England Keeps Interest Rates on Hold

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Today, the BOEs (Bank of England) MPC (Monetary Policy Committee) voted by 7 – 2 in favour of keeping interest rates steady at 3.75% with two dissenting members of Huw Pill and Megan Greene both voting to increase the rate by 25 basis points to 4.00%. The BOE has advised that inflation would pick up to just over 3.25% in Q4, lower than previously forecasted in April of this year. The decision to keep interest rates on hold came in the wake of data released showing the UK’s unemployment rate falling to 4.90% in the three months to April.

Recent data released from the ONS (Office of National Statistics) shows that the number of United Kingdom job vacancies fell to its lowest level for five years as businesses cut back on recruitment. On the inflation front the Governor of the BOE Andrew Bailey has advised that there “still is some inflationary pressure in the pipeline” with the Middle East crisis weighing negatively on energy and pushing up prices. He also stressed the political neutrality of the BOE but underlined the fact that political stability is critical during sensitive moments such as the upcoming Makerfield by-election as monetary policy relies on predictability.

Megan Greene, one of the two dissenting voters looking for a ¼% hike in interest rates highlighted the uncertainty over the impact on households and businesses of higher energy prices. However, Governor Bailey was quoted as saying, “Energy prices have come down quite a lot, but they are still above where they were before this conflict started. Inflation is higher than we expected it to be”. He went on to say, “I think holding is the right position to be in at the moment for that, so I think it is a sensible decision in light of the news”. Experts noted that the MPC met just before the Iran/United States peace deal was signed and when the MPC meets again at the end of July votes may well be swayed when the success and longevity of the peace deal will be clearer.

Analysts advise that financial markets reacted with a cautious but dovish tilt to the BOEs decision to keep interest rates at 3.75%with a notable shift in Sterling weakness and a fall in equities, as investors interpreted the BOEs downgraded inflation outlook as a signal that disinflation is taking hold. The money markets are pricing in the potential for one rate hike by the close of business 2026, and the swaps market is currently pricing in a higher for longer trajectory for central bank base rates with no immediate return to lower interest rates. Currently, experts are suggesting there is a wait and see outlook as to whether or not the Iran/US peace deal holds.

Federal Reserve Holds Interest Rates Steady

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Today, and chairing his first FOMC (Federal Open Market Committee) meeting, the new Chairman of the Federal Reserve Kevin Warsh and all his colleagues on the FOMC voted unanimously to keep interest rates steady in the range of 3.50% – 3.75%. Rates remained unchanged despite the fact that headline inflation is currently 3.80% with core inflation sitting at 3.30% (excludes volatile energy and food costs) which is well above the Fed’s long-term target figure of 2.00%. The policymakers SEP (Summary of Economic Projections) raised their forecast for interest rates advising that there may be one rate hike between now and the end of the year.

Officials further advised that inflation remained in an elevated state partly due to supply shocks due to the United States/Iran Israel conflict which has caused energy prices to skyrocket. The Federal Reserve has a dual-purpose mandate where they have to keep inflation at the target figure of 2.00% whilst ensuring maximum employment. Signals emanating from inside the Federal Reserve suggest that policymakers now consider the employment market to be in a healthy state and are now going to concentrate on tackling inflation.

In his first post-meeting press conference as Chairman of the Federal Reserve, Kevin Warsh announced plans to overhaul the central bank with a particular eye on its public communications. He went on to advise he will create five new taskforces that will look into productivity and jobs, the Federal Reserve’s balance sheet, data, and broad conduct of monetary policy including communications. Language in the committee’s statement has already changed with Chairman Warsh acknowledging “It’s a bit shorter, a bit simpler and it dispenses with some older language. That statement just gives you the facts, as best we can judge it”.

The statement also noted that “Economic activity is expanding at a solid pace despite elevated uncertainty that owes, in part, to the conflict in the Middle East. Productivity growth and capital investment are strong, job gains have kept pace with the workforce, and the unemployment rate has changed little. Inflation remains elevated relative to the Committee’s 2.00% goal, in part reflecting supply shocks that have driven price increases in certain sectors, including energy”. Chairman Warsh told reporters that the Federal reserve is committed to reducing inflation to 2.00%.

Since President Trump took office for the second time there have been unprecedented attacks from the White House on the character and policy decisions of Chairman Warsh’s predecessor Jerome Powell. Under his watch the FOMC last cut interest rates on 10th December 2025, and he regularly incurred the President’s wrath as he was insisting the Federal Reserve cut rates on a regular basis. Interestingly, with a new hawkish stance in the Federal Reserve, Trump has withheld judgement on the new leader of the Federal Reserve (also Trump’s pick for the job), and has said “he will be guided by what he (Warsh) wants. An interesting about turn for a leader who is dead set on interest rate cuts. However, if rates do not come down sometime soon, we may see President Trump reversing to type with the new Federal Reserve leader coming in for a bit of White House wrath.

Bank of Japan

Bank of Japan Raises Interest Rates

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Today, the BOJ (Bank of Japan) voted by a majority of 7–1, (the one dissenting vote was board member Toichiro Asda) to raise its benchmark interest rate by 25 basis points to 1.00%, the highest interest rates have been for 31 years. Experts advise that the BOJ will continue to vote for interest rate increases every six months with the possibility of a further increase by the end of the year. The board met without Governor Kazuo Ueda, (the first time since 2010 that the board has voted without a Governor present), who is currently hospitalised with an illness. 

In the absence of the Governor, Deputy  Governor Shinichi Uchida chaired the meeting and in the post-meeting press conference said, “Compared with the previous meeting in April, the U.S. and Iran have signed a memorandum. That is a welcome. Having said that, there is uncertainty on the pace of improvement in distribution (of oil)”. He went  on to say, “The risk of a sharp deterioration in the economy  has diminished. On the other hand, prices are broadening, and there is a risk that underlying inflation may deviate from our target”.

On the pace of future rate hikes Deputy Governor Uchida said, “We will look at economic, price and financial developments, particularly with an eye on the Middle East situation, for the time being. We’ll look at whether the economy and prices are moving in line with our forecasts, as well as risks. With underlying inflation approaching 2.00%, we need to be mindful of upward price risks. We will guide policy so that we won’t fall behind the curve. The main difference between our previous meeting and this one is that downside risks to Japan’s economy have subsided significantly. Additionally, we have seen steady pass-through of costs in business-to-business prices, which led us to be more vigilant to inflation risks”.

Indeed, analysts advise that recent data shows that in May wholesale inflation* spiking to a 3-year high of 6.30% signifying that companies were passing on higher costs due to the energy shock created by the United States/Iran Israel conflict. However, they expect core consumer inflation to increase above the target inflation level of 2.00% later this year as it had originally fallen below the target level due to government subsidies aimed at curbing utility bills. The conflict in the Middle East has added complications to the policy path being pursued by the BOJ adding inflationary pressure through increasing costs of oil which hurts an economy that is heavily reliant on imported fuel and other energy derivatives.

*Wholesale Inflation – Measures the rising or falling costs of raw materials and goods in bulk before they reach the consumer.

Headline Inflation  – represents the overall increase in prices for goods and services within an economy, as measured in total consumption including  the volatile prices of food and energy.

Underlying or Core Inflation – Measures and tracks the long-term structural trend of consumer prices excluding volatile prices of food and energy.

The decision to raise rates is not only to tackle Japan’s inflation problems but it is also in an effort to stabilise Japan’s currency, the Yen, which has come under pressure from major currencies such as the Euro and the U.S. Dollar, with one expert commenting that there has been a sense that the Yen is too cheap and that raising the interest rate will not hurt. The Prime Minister Sanae Takaichi is renowned  for boosting spending in Japan but has not been critical of the BOJ’s interest rate policy even though she has previously been dismissive of rate hikes.

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