The Japanese yen rose in Asian trading on Tuesday against a basket of major and minor currencies, putting it on track for its first gain in three sessions against the US dollar. The move helped the currency pull further away from its lowest levels in 40 years, renewing speculation about whether Japanese authorities could step in to support the local currency.

With inflationary pressures easing on policymakers at the Bank of Japan, expectations for an interest rate hike at the central bank’s July meeting have declined, as investors await additional economic data from the world’s fourth-largest economy.

The Price

• USD/JPY today: The dollar fell around 0.25% against the yen to ¥161.69, compared with an opening level of ¥162.07, after touching an intraday high of ¥162.18.

• The yen ended Monday down 0.45% against the dollar, marking its second consecutive daily loss.

• The Japanese currency hit a 40-year low of ¥162.84 per dollar last Wednesday before entering a short-term recovery phase that fueled speculation about possible intervention in the foreign exchange market.

Japanese authorities

The yen has once again come under the spotlight after approaching its weakest levels since 1986 against the US dollar, increasing expectations that Japanese authorities may intervene to prevent excessive weakness in the currency.

Views and analysis

• Analysts at OCBC believe the risk of intervention is more likely to trigger bouts of volatility and temporary corrections rather than create a lasting reversal in the USD/JPY trend.

• They added that without a meaningful shift in economic fundamentals, verbal warnings or even direct intervention alone are unlikely to alter the broader direction of the currency pair.

• Marc Chandler, Chief Market Strategist at Bannockburn Global Forex, said the market remains aware of the risk of intervention by Japanese authorities.

• Chandler added that options market activity still shows signs of major investors buying short-term dollar put options as a hedge to protect long-dollar positions in the event of official intervention.

• Lee Hardman, Senior Currency Analyst at MUFG, said there had been speculation late last week that Japan might intervene to support the yen during the US holiday period when trading conditions were less liquid. However, no action was taken, which contributed to the yen giving back part of its recent gains.

Japanese interest rates

• Market pricing currently implies less than a 25% probability that the Bank of Japan will raise interest rates by 25 basis points at its July meeting.

• Investors are awaiting further data on inflation, unemployment and wage growth in Japan to reassess those expectations.

Oil prices were little changed on Monday, trading near levels seen before the outbreak of the war with Iran, after Saudi Arabia cut its official crude selling prices and OPEC+ approved another production target increase starting in August, while oil exports through the Strait of Hormuz continued to recover.

Brent crude futures, which surged above $126 per barrel in late April to their highest level in four years, fell 27 cents to $71.85 per barrel by 1:35 p.m. ET.

US West Texas Intermediate crude also declined 27 cents to $68.42 per barrel. There was no settlement for US crude futures on Friday due to a public holiday in the United States.

Both benchmarks were little changed last week after retreating throughout most of the previous month to levels last seen in late February, before the conflict significantly disrupted global energy flows.

Giovanni Staunovo, an analyst at UBS, said downside pressure continues to stem from the release of oil tankers that had previously been stranded in the Gulf, increasing seaborne oil supply.

Investors continue to monitor discussions between the United States and Iran regarding the future of shipping through the Strait of Hormuz, while also tracking the pace of recovery in Gulf oil exports.

Meanwhile, two sources familiar with the matter said the United Arab Emirates raised oil production in June to near-record levels, exceeding 3.8 million barrels per day after leaving OPEC to free itself from production constraints.

Saudi price cuts and OPEC+ output increase raise price war concerns

Saudi Arabia set the official selling price of its Arab Light crude for Asia in August at $1.50 below the Oman/Dubai benchmark average, marking the largest monthly price cut since Reuters began tracking the data in 2003.

Traders also reported that Abu Dhabi National Oil Company (ADNOC) is offering crude cargoes through tenders at discounted prices.

Robert Yawger, Director of Energy Futures at Mizuho, said there are growing signs that Gulf producers may be preparing for a price war.

On Sunday, the Organization of the Petroleum Exporting Countries (OPEC) and its allies, led by Russia, agreed to increase production targets by 188,000 barrels per day starting in August, following similar increases in June and July.

However, these production increases largely remained theoretical because the war with Iran led to the closure of the Strait of Hormuz to private oil tanker traffic serving major OPEC producers, including Saudi Arabia, Kuwait, and Iraq, limiting their ability to raise actual output.

Tamas Varga, an analyst at PVM, said producers are selling into a declining market, reducing the chances of a near-term price recovery. He added, however, that lower oil prices will ultimately support global demand.

In other developments, the Ukrainian military announced overnight strikes targeting Russia’s largest oil refinery in Omsk, as well as facilities in the Yaroslavl and Leningrad regions.

In the shipping sector, Maersk and Hapag-Lloyd announced plans to resume some voyages through the Suez Canal, which handles roughly 10% of global trade.

Most shipping operators had abandoned the Asia-Europe route after Houthi attacks on vessels in the Red Sea during the Gaza war.

A Hapag-Lloyd spokesperson said returning to the route would shorten voyage times by approximately four weeks compared with alternative shipping routes.

The intense heatwave that swept across Europe last week highlighted the growing challenges facing the continent’s transition to clean energy. The extreme weather coincided with London Climate Action Week and even forced the cancellation of some scheduled events, reinforcing warnings about the urgency of addressing climate change.

One of the key conclusions emerging from the conference, further underscored by the severe weather conditions, was that Europe has missed important opportunities to accelerate its shift toward clean energy and reduce greenhouse gas emissions.

According to a side report published by news platform Semafor, several bankers attending the event agreed that European Union authorities risk slowing energy transition investments by failing to complete the integration of Europe’s capital markets, while shortcomings in regulatory frameworks continue to create additional obstacles.

Officials from Barclays argued that European and British regulations impose excessive restrictions on preferred energy storage technologies and called for governments to play a larger role in coordinating efforts between entrepreneurs and investors to accelerate funding.

European energy markets have faced unprecedented pressure in recent years due to a series of global crises. According to the report, policymakers have failed to implement sufficient measures to prevent similar disruptions from recurring.

Earlier this year, the BBC warned that Europe had “sleepwalked into a new energy crisis” after the closure of the Strait of Hormuz disrupted markets that were still recovering from the effects of the Russia-Ukraine war, related sanctions, and global supply chain bottlenecks.

Renewable energy becomes an economic and security necessity

As geopolitical disruptions continue to affect fossil fuel supplies, experts increasingly believe that diversifying energy sources and strengthening self-sufficiency have become essential pillars of energy security both in Europe and globally.

Wind and solar power are no longer viewed solely as tools for combating climate change. They are increasingly seen as critical components of energy independence and resilience.

David Frykman, General Partner at Swedish venture capital firm Norrsken, previously wrote in Fortune magazine that wind and solar energy cannot be embargoed, blockaded, or weaponized by foreign powers. He added that every terawatt-hour of renewable energy produced domestically is energy that cannot be used by adversaries as a source of geopolitical pressure.

Despite the steps Europe has taken since the outbreak of the Russia-Ukraine war to expand renewable energy capacity, the subsequent energy shock caused by the conflict involving the United States, Israel, and Iran exposed the limitations of those efforts. According to the report, Europe still faces a significant energy gap while simultaneously confronting increasingly dangerous heatwaves.

In a recent report, Allianz warned that extreme heat has become a structural economic risk and identified Europe as one of the regions most vulnerable to its impact.

The company estimates that Europe’s largest economies could lose more than $600 billion by 2030 due to costs and damages associated with rising temperatures. France is expected to face the largest losses at roughly $240 billion, followed by Italy at $147 billion, Germany at $131 billion, and Spain at approximately $120 billion.

The report quoted a European diplomat as saying that European leaders, instead of focusing on the long-term plans needed to strengthen the continent’s competitiveness in an increasingly volatile world, have become preoccupied with rising energy costs and voter concerns. As a result, they are pursuing short-term solutions similar to those adopted after Russia’s full-scale invasion of Ukraine.

The diplomat noted that while the current conflict differs from previous crises, Europe’s divisions and energy-related challenges remain largely unchanged, warning that repeating the same policy responses is no longer sustainable.

Several bankers participating in London Climate Action Week argued that one of the most important solutions is reducing fragmentation across European financial markets. They said that the large number of regulatory systems and bureaucratic hurdles across the European Union weakens the ability of capital markets to finance the energy transition efficiently.

They also noted that this environment limits the ability of European startups to compete for investment funding against their counterparts in the United States, ultimately slowing innovation and investment in clean energy technologies across the continent.

Copper prices rose on Monday, attempting to recover from recent losses as banks continued to issue more cautious forecasts for the industrial metal amid weakening demand.

Goldman Sachs lowered its average copper price forecast for 2026 to $12,650 per ton, down from its previous estimate of $12,850 per ton, citing weaker demand expectations as global economic growth slows. However, the bank maintained its positive long-term view, supported by the global shift toward electrification and clean energy.

Goldman now expects the global copper market to record a surplus of 490,000 tons this year, up from its previous estimate of 380,000 tons, after cutting its forecast for global refined copper demand growth to 1.6% year-on-year from 2% previously.

The revision followed the bank’s economists’ expectations that the energy price shock caused by disruptions in the Middle East would reduce global GDP growth by around 0.4 percentage point.

Goldman said the downgrade to copper demand was smaller than its cut to aluminum demand, explaining that copper’s growing role as a strategic and structural metal in the global economy makes it less exposed to global economic cycles.

Analysts led by Aurelia Waltham said the demand revision for copper was less severe than for aluminum because of the increasingly strategic and structural nature of copper demand.

In trading on Monday, copper futures for September delivery rose 0.8% to $6.22 per pound as of 15:29 GMT.

Short-term volatility, long-term optimism

In the near term, the analyst team said copper prices are likely to remain volatile, but could find support if economic conditions stabilize.

Under Goldman’s base-case scenario, which assumes energy flows through the Strait of Hormuz begin recovering from mid-April, copper prices are expected to average $12,700 per ton in the second quarter of 2026, before gradually easing toward the bank’s estimated fair value of $12,000 per ton in the second half of the year.

Goldman also warned that current prices may not be fully supported by market fundamentals. Even after the March correction, copper is still trading well above the bank’s estimated 2026 fair value of around $11,100 per ton, leaving it vulnerable to further declines if the economic outlook deteriorates or investors move to reduce risk exposure.

The analysts also noted that their forecasts do not factor in any potential supply disruptions from the Middle East.

They pointed out that the Democratic Republic of Congo, which relies on sulfur shipped through the Strait of Hormuz for a key stage of copper production, accounts for around 15% of global mined copper output.

Industry feedback suggests producers in the Democratic Republic of Congo have sulfuric acid inventories sufficient for up to three months, meaning any short-term disruption would likely have a limited impact. However, a longer-lasting interruption could tighten supply and reduce the expected market surplus.

Despite these risks, Goldman kept its long-term forecast unchanged, expecting copper prices to rise to $15,000 per ton by 2035.

The bank believes Middle East tensions could reinforce the shift toward electrification and clean energy, estimating that power grids and energy infrastructure will account for around 60% of global copper demand growth through 2030.