Good morning and welcome back to FirstFT Asia. In today’s newsletter:
Oil prices set to jump as Iran war intensifies
What the conflict means for the global economy
China’s solar boom helps energy emissions fall
We begin in the Middle East, which has been thrust into its widest war in decades after the US and Israel launched attacks on Iran, killing its supreme leader Ayatollah Ali Khamenei and prompting a wave of retaliatory strikes from Tehran.
The latest: Israel and Iran continued to trade fire yesterday, with Iranian drone and missile barrages setting off sirens across Israel and hitting ports in Dubai and Oman. At least 45 people were reported killed yesterday across the region. The US military said three of its soldiers were killed and five seriously wounded — the first reported American casualties.
US President Donald Trump insisted there will be “a great deal for the world” and said he would be “talking” to the new Iranian leadership, without giving more details. Trump also said the military campaign against Iran could last “four weeks or so”.
Oil markets brace for turmoil: Shipping through the Strait of Hormuz, a critical waterway for global energy supplies, has slowed to a near standstill after insurers warned they would cancel policies and raise premiums. The disruption is expected to drive up oil prices between 5 and 15 per cent when the market reopens this morning, despite Opec+ pledging to increase its production by 206,000 barrels a day from April. The conflict has also upended air travel across the world, with thousands of flights cancelled and tens of thousands of travellers left stranded.
To understand the stakes of the conflict, I recommend these essential stories:
Who rules Iran? After the killing of Ayatollah Ali Khamenei, the country’s top political and military figures insist a smooth succession process will unfold.
Iran’s new retaliation strategy: Tehran has launched constant barrages at Israel designed to stretch air defences while targeting civilian sites around the Gulf.
Dispatch from Tehran: Between the sounds of explosions, a normally chaotic city has turned eerily quiet.
Opinion: The decapitation of Iran’s leadership has left the regime reeling but does not answer the question of what comes next, writes Gideon Rachman.
Read more Middle East news and analysis at FT.com and follow our live blog for the latest developments.
Here’s what else we’re keeping tabs on today:
Economic data: Indonesia publishes February inflation data and January trade balance. February manufacturing PMIs are due for India, Japan, Vietnam, Australia and other countries.
Monetary policy: Bank of Japan deputy governor Ryozo Himino speaks at a meeting with local leaders in Wakayama.
Mark Carney meets Narendra Modi: The Canadian prime minister meets his Indian counterpart in New Delhi before travelling to Australia and Japan. Here’s more on Carney’s “middle power alliance” tour.
Five more top stories
1. Tokyo’s diplomatic feud with China threatens to undermine the tourism boom that boosted Japanese retailers such as Uniqlo, Muji and Don Quijote and helped reshape their business models. The department store chains all suffered a double-digit drop in duty-free sales in recent months amid a decline in Chinese visitors to Japan.
2. Amazon’s mass lay-offs of more than 30,000 workers since October has piled pressure on employees and dampened morale at the world’s largest company by revenue. But analysts expect Amazon’s drive for a “leaner” operation could offer a playbook for rivals as large tech groups invest billions to develop AI and the data centre infrastructure it relies on.
3. The Tony Blair Institute has provided training and consulting to the Palestinian technocrats appointed to run Gaza under Trump’s Board of Peace. A team from the former British prime minister’s institute held sessions in Cairo for members of the National Committee for the Administration of Gaza in mid-January, according to people familiar with the situation. Here are more details.
4. JPMorgan Chase cut some trading functions it provided for Citadel Securities after the firm launched a service for clients that muscled in on the bank’s business, according to people familiar with the matter. The moves underscore the tensions between banks and trading firms as their roles on Wall Street evolve.
5. Berkshire Hathaway’s new chief executive Greg Abel on Saturday said that he was committed to retaining the $1.1tn conglomerate’s fortress-like balance sheet and that its massive cash holdings did not signal a retreat from dealmaking. Here’s what Abel wrote in his first letter to shareholders.
News in-depth
What will war in Iran do to the global economy? The answer depends on whether the US and its partners can avert a sustained shutdown of energy shipments through the Strait of Hormuz. If not, an oil price surge risks reigniting inflation in major economies, derailing central bank rate-cutting plans and shaking business confidence.
We’re also reading . . .
South Korea: In a country with strict immigration laws, companies have become increasingly reliant on foreign labour as the native population shrinks.
Pavel Durov: The Telegram boss has become a poster boy for the backlash in Europe over CEO accountability — and a target for Russia.
OpenAI: What can Hershey — yes, the chocolate company — tell us about the AI start-up’s unusual charitable structure? Peter Kurie explains.
Chart of the day
China’s emissions from energy and industry fell slightly last year after a solar boom helped it to meet a larger part of its growing power needs, according to official statistics.
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Take a break from the news . . .
Japan’s high-tech toilets, once seen as “weird” to the outside world, are now the global gold standard. But as Japanese innovations go mainstream, the risk is that the world stops thinking of Japan as the world’s pre-eminent driver of novelty, writes Tokyo bureau chief Leo Lewis.
