GLOBAL POLITICAL RISK: Trump States US/Iran Conflict Likely Another 2-3 Weeks

The stop/start nature of the NZ jobs recovery continued in Jan. Filled jobs rose 0.2%m/m, after a revised 0.3% fall in Dec (which was originally reported as a flat outcome). In y/y terms filled jobs were down 0.2%. The m/m profile has been -0.2% in Oct last year, +0.5% in Nov, -0.3% in Dec and now +0.2% in Jan. Hence there isn't clear signs of a consistent pick up in labour demand. This will feed into RBNZ thinking around holding rates lower as it waits for firmer evidence of economic recovery feeding into the labour market (before it tightens rates). The central bank did state at its last meeting that a rate hike was possible by year end but this wasn't set in stone in terms of its OCR outlook. 

• The industry level data continued to show jobs creation in the services side, rather than goods producing industries. Stats NZ noted: "By industry, the largest changes in the number of filled jobs compared with January 2025 were in:
  construction – down 2.8 percent (5,381 jobs) health care and social assistance – up 1.6 percent (4,560 jobs) public administration and safety – up 2.6 percent (4,282 jobs) manufacturing – down 1.6 percent (3,584 jobs) education and training – up 1.7 percent (3,478 jobs)."
• This also fits with the economic recovery not being broad enough yet to aid the goods producing industries from a jobs growth standpoint.  

NZGBs are 5bps richer after Friday’s solid gains for US tsys. 

• Mirroring the Bund going into the European close, US tsys extended gains in late trade, gaining momentum into month end in addition to geopol risk tied to US/Iran tensions.
• Today’s market open should see a “classic flight-to-quality bid” in US tsys, after the weekend’s attack on Iran.
• Broader risk trends are likely to be dictated by how energy markets react. Oil markets will be watching developments in the Strait of Hormuz, a key supply route for global supplies. BBG noted: "Three ships were attacked near the mouth of the Persian Gulf, amid signs that tanker traffic through the vital Strait of Hormuz oil-and-gas chokepoint is halting because of conflict in the region. Iran said it doesn't intend to shut the waterway, just a day after ships in the area heard radio broadcasts stating that transit through Hormuz was banned."
• It’s a busy week ahead for US data with ISM manufacturing and services reports for February and retail sales for January building up to Friday’s nonfarm payrolls report for February.
• NZ’s filled jobs rose 0.2% m/m in January.
• Swap rates are 4-5bps lower.
• RBNZ-dated OIS pricing is little changed across meetings. No tightening is priced for April, while December 2026 assigns 27bps.

TD outlines its viewpoints on the immediate market risk implications from the Iran conflict. It sees oil spiking to $90/bbl in the near term and notes reports of risks of $100/bbl if we see a prolonged shipping shortage. It notes the impact on China, given most Iranian oil exports go to China. It also outlines broader risk market implications around a potential US Tsy rally and USD safe haven bid. See below for more details. We also note the risks for EM Asia currencies from a negative terms of trade shock form higher oil/energy prices, given much of the region are net energy importers. 

• TD: "We expect Brent and WTI to trade around $90/barrel on Monday. Strikes have been reported in nations that account for more than one-third of global seaborne crude flows and the overwhelming majority of global spare capacity. News suggesting a prolonged shipping stoppage would push oil materially above $100/barrel. While OPEC+ has announced increased production, this has limited impact on reducing risk premiums until it is clear shipping lanes are free and clear."
• "China is most impacted by protracted disruptions. 99% of Iranian oil exports go to China, with nearly 40-50% of China's overall oil imports coming from the GCC. Over 80% of Hormuz LNG flows go to Asia, with 10% going to Europe."
• The bank also expects US Tsys to rally, led by the 10yr, with safe haven characteristics to offset inflationary concerns.  Similar factors will be in play for the USD, with only CHF expected to rally. Risk sensitive plays like AUD and EMFX, including CNH, are expected to underperform. It sees AUD/USD falling to 0.6900 support.  
• This is playing out so far today, with CHF up 020% versus the USD, but the rest of the G10 is down to varying degrees versus the USD (with risk sensitive plays, like the AUD most impacted). USD/CNH has risen around 0.30% to 6.8845/50.
• For EM Asia currencies, in addition to broader risk trends, the negative terms of trade shock from higher oil/energy prices will also be in play. Outside of Malaysia, most of the region is a new energy importer.