Global Economics Weekly The rest is (geo)politics

Research evidence excerpt

Global Economics Weekly The rest is (geo)politics

Barclays | Global Economics Weekly: The rest is (geo)politics

Ukraine's successful launches of long-range drone attacks on Russian refineries are estimated

to have knocked out 45% of Russia's refining capacity.7 This has prompted Russia, which had

already lowered its seaborne diesel exports for some time, to fully ban exports of diesel. With

Russia being the world's second-largest diesel exporter (after the US), this could have significant

effects on global diesel balances, keeping pressure on prices elevated.

FIGURE 1. Crude oil prices remain close to pre-war levels, but are FIGURE 2. Meanwhile, prices for distilled products such as diesel

sensitive to the situation on the ground remain well above pre-war levels

Brent crude oil EUR/kL Diesel pump prices

120 $/bl

100 2000

90 1900

80 1800

70 1700

60 1600

50 1500

Jan-26 Feb-26 Mar-26 Apr-26 May-26 Jun-26 Jul-26 Jan-25 Apr-25 Jul-25 Oct-25 Jan-26 Apr-26 Jul-26

Source: Bloomberg, Barclays Research Source: Bloomberg, Barclays Research

Domestic politics keep government bonds under

pressure

Takaichi's fiscal ambitions drive Japan bond yields to new highs

Japanese government bond yields have risen further this week, with the 10y yield recently

trading in the 2.8% range, with the JPY weakening in parallel. This was at least in part triggered

by Takaichi's latest fiscal plan: the “Honebuto” Basic Policy includes a headline JPY370tn

public-private investment program, while also making reference to the BoJ by emphasising that

"appropriate monetary policy is important for strengthening the economy".

The sheer size of government spending, for an economy with much above 200% of gross

government debt, was enough to catch the market's attention. It also came on top of the