US-Iran stalemate raises energy and terms-of-trade risks; Nomura prefers FX relative value and Asian curve steepening trades
AI summary card
US-Iran stalemate raises energy and terms-of-trade risks; Nomura prefers FX relative value and Asian curve steepening trades
Nomura believes the Middle East situation remains the market's key variable. If risks around the Strait of Hormuz persist, it would support the USD and weigh on energy-sensitive currencies. Accordingly, it upgrades long EUR/INR and long EUR/PHP to 4/5, and maintains high-conviction trades including long SGD/IDR, long NZD/USD, Hong Kong 2s10s steepeners, and receive 5y THB.
- The US-Iran stalemate and the risk of a closure of the Strait of Hormuz are the core near-term shocks, potentially pushing up oil prices, weakening risk sentiment, and supporting the USD.
- In Asian FX, IDR, PHP, and INR, which are vulnerable due to energy imports and fragile balance of payments positions, are seen as relatively weak; long SGD/IDR, long EUR/PHP, and long EUR/INR are all 4/5 conviction trades.
- In G10 FX, the report prefers EUR relative to GBP and SEK, and maintains long NZD/USD, citing central bank policy divergence, seasonal flows, and sticky New Zealand inflation.
- In Asia rates, the report prefers curve steepeners in India and Hong Kong, and maintains receive 5y THB; the China strategy is long 30y CGB versus pay Jun-3y NDIRS, with 3/5 conviction.
Report interpretation
Overview
This report is Nomura's thematic strategy update on global FX and Asian rates. The main theme is the impact of the US-Iran conflict and related Strait of Hormuz risks on energy prices, terms of trade, balance of payments, and risk sentiment, while also providing trade recommendations across Asian FX, G10 FX, and Asian rates in light of upcoming BOJ, FOMC, ECB, BOT, and other central bank meetings over the next week.
Core views
The core view is that even though US-Iran de-escalation remains possible, the lack of formal bilateral talks and the persistence of disagreements mean the risk of a prolonged stalemate is high. If energy prices rise further, it would be negative for currencies of energy-importing countries and for risk assets, and could bring USD buying. Nomura therefore mainly chooses relative value trades: in Asian FX it favors SGD versus IDR, and EUR versus PHP and INR; in G10 FX it favors NZD/USD, EUR/SEK, and EUR/GBP but lowers conviction on EUR/GBP; in Asian rates it prefers Hong Kong and India curve steepeners, receive 5y THB, and long 30y CGB versus pay Jun-3y NDIRS.
Analysis framework
The report combines geopolitical scenarios, energy price transmission, balance of payments pressure, central bank reaction functions, rate pricing, flows, and seasonal factors to construct trades. For each trade it provides target levels, timelines, conviction ratings, and key risks, and uses a 1-5 conviction scale to express position sizing.
Methodology notes
US-Iran and Strait of Hormuz scenarios
By assessing paths such as the resumption of negotiations, a prolonged stalemate, and escalation of military action, it judges the directional impact on energy prices, the USD, risk assets, and energy-sensitive currencies.
FX and rates RV
Because the political path has two-way uncertainty, the report prefers cross-currency and curve relative value rather than outright long USD or a single-direction bet.
1-5 conviction scale
1 represents watching, 2 represents close watching, 3 represents holding one-third of the target position, 4 represents holding two-thirds of the target position, and 5 represents holding 100% of the target position.
Asset mapping & comparison
Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).
- SGD/IDRA relative value trade long SGD and short IDR
- Strengths
- SGD is supported by the possibility of tighter MAS policy, S$NEER support, and Singapore's macro resilience.
- Weaknesses
- If global growth risks broaden, Singapore's export-oriented economy would still come under pressure.
- Comparison
- Relative to IDR, SGD is better able to withstand energy and balance-of-payments shocks.
- Risks
- Rapid US-Iran de-escalation, easing Indonesian fiscal concerns, export receipt rules supporting IDR, or S$NEER approaching the top of the policy band.
- EUR/PHPLong EUR, short PHP
- Strengths
- PHP's current account is sensitive to energy prices, and BSP commentary indicates tolerance for market-determined FX moves.
- Weaknesses
- If BSP intervenes heavily, PHP could outperform temporarily.
- Comparison
- Relative to EUR, PHP is more vulnerable to energy import costs and weaker seasonal remittances.
- Risks
- Rapid normalization of the Strait of Hormuz, one-way USD strength, or strong BSP intervention.
- EUR/INRLong EUR, short INR
- Strengths
- INR is affected by high oil prices, portfolio outflows, RBI reserve depletion, and trade negotiation volatility.
- Weaknesses
- If RBI strongly supports INR or foreign inflows recover, trade performance may be constrained.
- Comparison
- Relative to EUR, INR is more sensitive to energy and balance-of-payments pressures.
- Risks
- Active RBI intervention to support INR, or broad USD strength putting pressure on EUR.
- USD/CNHShort USD/CNH but with reduced conviction
- Strengths
- China's export resilience, corporate FX conversion, and potential improvement in US-China relations support CNH.
- Weaknesses
- US-Iran risks and official constraints on lower fixings limit near-term performance.
- Comparison
- CNH still has a basis for relative outperformance, but near-term certainty is lower than before.
- Risks
- Chinese official warnings against one-way appreciation, or continued USD strength due to safe-haven demand or oil price shocks.
- NZD/USDLong NZD/USD
- Strengths
- Sticky New Zealand inflation, higher RBNZ rate expectations, residual short covering, and potential foreign inflows support NZD.
- Weaknesses
- Risk aversion and high energy prices still limit the extent of NZD/USD recovery.
- Comparison
- If US-Iran tensions ease, NZD/USD may respond more strongly to a risk recovery.
- Risks
- Breakdown of US-Iran negotiations, further rises in energy prices, or actual RBNZ communication falling short of market expectations.
- HKD利率曲线Maintain the Jun-2s10s Hong Kong IRS steepener, and additionally pay 10y HK
- Strengths
- 3m HIBOR below 3% suppresses the front end, while improvements in the economy and property sector could push up the long end.
- Weaknesses
- If Hong Kong liquidity becomes overly loose, upside in the long end may be limited.
- Comparison
- The report believes the carry on Hong Kong steepeners is better than on US steepeners.
- Risks
- A sharp decline in global rates, even more ample Hong Kong liquidity, or a reversal in risk sentiment.
- THB利率receive 5y THB
- Strengths
- The macro backdrop is weak, supply-side energy shocks may not necessarily lead BOT to hike, and actual implementation of additional government borrowing may be smaller than headline figures suggest.
- Weaknesses
- Energy shocks and news of additional borrowing have already caused Thai rates to underperform temporarily.
- Comparison
- Relative to market rate hike pricing, Nomura is more inclined to believe BOT will suppress hike expectations.
- Risks
- A hawkish BOT, government borrowing exceeding expectations, or markets placing greater emphasis on inflation risks.
- 30y CGB versus Jun-3y NDIRSLong 30y CGB and pay Jun-3y NDIRS
- Strengths
- Ample liquidity, weak domestic demand, and still-wide 10s30s spreads support ultra-long bonds.
- Weaknesses
- Demand for 30y CGSB is not strong and government bond supply will rise from May to September.
- Comparison
- The report prefers the performance of 30y CGBs relative to short-end swaps, but conviction is only 3/5.
- Risks
- A stronger-than-expected equity market, 30y supply pressure, or persistently low repo rates weakening the logic for paying 3y.
Key data
- long SGD/IDRTarget 13,850, expected by end-July 2026, about 6% return, conviction 4/5Reasons include SGD's relative resilience, the possibility that MAS may turn tighter due to rising inflation, and pressure on IDR from the balance of payments, fiscal concerns, and foreign outflows.
- long EUR/PHPTarget 73.5, expected by end-July 2026, about 4% return, conviction upgraded from 3/5 to 4/5PHP is affected by energy prices, the current account, and BSP's tolerance for currency weakness.
- long EUR/INRTarget 113, expected by end-August 2026, about 5% return, conviction upgraded from 3/5 to 4/5INR faces pressure from rising energy prices, portfolio outflows, trade negotiation uncertainty, and RBI FX reserve depletion.
- short USD/CNHTarget 6.60, expected by end-August 2026, conviction downgraded from 4/5 to 3/5The renminbi still has appreciation drivers, but the US-Iran stalemate and central parity management create near-term resistance.
- long NZD/USDConviction 4/5New Zealand Q1 headline inflation was 3.1%, still above the upper end of the RBNZ target range, and NZD still looks relatively cheap on interest rate differentials.
- Hong Kong 2s10s IRS steepenerTarget 25bp return, expected by end-May 2026, conviction 4/5The front end is suppressed by ample liquidity, while the long end is supported by improving loan growth and hedging demand for global yields.
- receive 5y THBTarget 20bp return, conviction 4/5Nomura expects BOT to push back against rate hike expectations because the shock mainly comes from supply-side energy prices.
- China long 30y CGB versus pay Jun-3y NDIRSTarget 15bp return, expected by end-May 2026, conviction 3/5Ample liquidity, weak domestic demand, and a relatively wide 10s30s spread support 30y CGBs, but excessively low repo rates could also weaken the logic of paying 3y NDIRS.
Impact & implications
If the US-Iran stalemate persists and keeps energy prices elevated, the market impact will be concentrated through three channels: first, the terms of trade and balance of payments of energy-importing countries will come under pressure, making currencies such as IDR, PHP, and INR relatively weak; second, declining risk sentiment may support the USD and weigh on emerging market assets; third, central banks will need to balance rising inflation against slowing growth, pushing FX and rates markets to focus more on policy reaction functions. If negotiations resume or the Strait of Hormuz normalizes, falling oil prices could lead to a recovery in risk assets, a pullback in the USD, and rebounds in currencies such as JPY and NZD.
Risks
- A rapid US-Iran agreement or resumption of negotiations, causing oil prices to fall and reversing pressure on energy-sensitive currencies.
- An escalation in the US-Iran conflict, including new military action or a prolonged closure of the Strait of Hormuz, could create stronger USD buying and broader pressure on risk assets.
- Central bank communication from the BOJ, FOMC, ECB, BOT, and others that differs from market expectations could alter the logic of rates and FX trades.
- High energy prices could simultaneously bring higher inflation and weaker growth, increasing uncertainty around central bank reaction functions.
- Some strategies rely on relative value; if the USD strengthens or weakens sharply in one direction, cross performance could be suppressed.
- Asian FX intervention or policy management risks could alter the near-term paths of IDR, PHP, INR, CNH, and JPY.
What to watch
- Whether the US and Iran resume negotiations, and whether shipping through the Strait of Hormuz normalizes.
- Whether oil and gasoline prices continue to rise, and whether this triggers policy incentives in the US to de-escalate.
- What the BOJ says at its April 28 meeting about a June rate hike and JPY intervention risks.
- How the April 30 FOMC and ECB meetings respond to the Middle East conflict, inflation, and growth risks.
- Whether the BOT meeting pushes back against market pricing for Thai rate hikes.
- China's April manufacturing PMI, MLF operations, 7d repo fixing, and buying interest in ultra-long bonds.
- Hong Kong money supply and March loan growth data.
- New Zealand labor market and survey data, as well as remarks by RBNZ Governor Breman.