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India’s Modi Lauds Interim Trade Pact After US Tariff Rollback

Indian Prime Minister Narendra Modi addresses the media before the budget session of Parliament at Parliament House in New Delhi, India, 29 January 2026. (EPA)
Indian Prime Minister Narendra Modi addresses the media before the budget session of Parliament at Parliament House in New Delhi, India, 29 January 2026. (EPA)
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India’s Modi Lauds Interim Trade Pact After US Tariff Rollback

Indian Prime Minister Narendra Modi addresses the media before the budget session of Parliament at Parliament House in New Delhi, India, 29 January 2026. (EPA)
Indian Prime Minister Narendra Modi addresses the media before the budget session of Parliament at Parliament House in New Delhi, India, 29 January 2026. (EPA)

Indian Prime Minister Narendra Modi on Saturday hailed an interim trade agreement with the United States, saying it would bolster global growth and deepen economic ties between the two countries.

The pact cuts US "reciprocal" duties on Indian products to 18 percent from 25 percent, and commits India to large purchases of US energy and industrial goods.

US President Donald Trump, while announcing the deal Tuesday, had said Modi promised to stop buying Russian oil over the war in Ukraine.

The deal eases months of tensions over India's oil purchases -- which Washington says fund a conflict it is trying to end -- and restores the close ties between Trump and the man he describes as "one of my greatest friends."

"Great news for India and USA!" Modi said on X on Saturday, praising US President Donald Trump's "personal commitment" to strengthening bilateral ties.

The agreement, he said, reflected "the growing depth, trust and dynamism" of their partnership.

Modi's remarks came hours after Trump issued an executive order scrapping an additional 25 percent levy imposed over New Delhi's purchases of Russian oil, in a step to implement the trade deal announced this week.

Modi, who has faced criticism at home about opening access of Indian agricultural markets to the United States and terms on oil imports, did not mention Russian oil in his statement.

"This framework will also strengthen resilient and trusted supply chains and contribute to global growth," he said.

It would also create fresh opportunities for Indian farmers, entrepreneurs and fishermen under the "Make in India" initiative.

In a separate statement, Commerce Minister Piyush Goyal said the pact would "open a $30 trillion market for Indian exporters".

Goyal also said the deal protects India's sensitive agricultural and dairy products, including maize, wheat, rice, soya, poultry and milk.

Other terms of the agreement include the removal of tariffs on certain aircraft and parts, according to a separate joint statement released Friday by the White House.

The statement added that India intends to purchase $500 billion of US energy products, aircraft and parts, precious metals, tech products and coking coal over the next five years.

The shift marks a significant reduction in US tariffs on Indian products, down from a rate of 50 percent late last year.

Washington and New Delhi are expected to sign a formal trade deal in March.

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Middle East War Reshaping National Energy Strategies, Says IEA

An empty fuel station, as India faces rising oil prices following the closure of the Strait of Hormuz amid the US-Israeli conflict with Iran, in Halvad, Gujarat, India, May 22, 2026. (Reuters)
An empty fuel station, as India faces rising oil prices following the closure of the Strait of Hormuz amid the US-Israeli conflict with Iran, in Halvad, Gujarat, India, May 22, 2026. (Reuters)
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Middle East War Reshaping National Energy Strategies, Says IEA

An empty fuel station, as India faces rising oil prices following the closure of the Strait of Hormuz amid the US-Israeli conflict with Iran, in Halvad, Gujarat, India, May 22, 2026. (Reuters)
An empty fuel station, as India faces rising oil prices following the closure of the Strait of Hormuz amid the US-Israeli conflict with Iran, in Halvad, Gujarat, India, May 22, 2026. (Reuters)

The Middle East war is pushing countries to open new supply routes and turn to domestic resources to tide over the world's biggest energy crisis, the International Energy Agency said Thursday.

"We are in the midst of the largest energy security crisis the world has ever faced -- and I believe this will reshape investment strategies globally, with parallels to the major changes the energy world witnessed after the oil shocks of the 1970s," said IEA executive director Fatih Birol

"We are already seeing intensified efforts by both producer and consumer countries to diversify trade routes and energy sources -- such as advancing new pipelines and other supply infrastructure, on the one hand, and turning more to domestically available resources, on the other," he added in the World Energy Investment report by the energy agency of the Organization for Economic Co-operation and Development (OECD).

The IEA estimates that global energy investment will reach $3.4 trillion in 2026, slightly higher than the previous year, with around $2.2 trillion devoted to power grids, storage, low-emission fuels, nuclear, renewables, energy efficiency and electrification.

Alongside this, around $1.2 trillion is expected to be invested in oil, natural gas and coal.

It nevertheless expects oil investment to decline for the third straight year in 2026, falling below $500 billion despite rising crude prices.

This is due to uncertainty over how long higher prices will last, project lead times, supply constraints and the tightening offshore rigs market, which are limiting short-term investment outside the Middle East.

By contrast, investment in natural gas is "projected to rise to $330 billion, the highest level in a decade, supported by a wave of new LNG export projects, particularly in the United States and Qatar," IEA said.

At the same time, oil-importing countries are turning to energy sources available domestically, notably renewables, nuclear and coal, the report said.

The IEA estimates that investment in renewables should reach around $665 billion in 2026, including $365 billion for solar alone.

Investment in nuclear energy and is set to exceed $80 billion annually while investment in coal should reach $180 billion -- the highest in 10 years, it said.

China alone will account for nearly 70 percent of global coal supply spending, and some Asian countries may seek to extend the operation of their existing coal-fired power plants in order to strengthen their energy security.

The IEA said investment in electricity supply and infrastructure is expected to reach nearly $1.6 trillion in 2026, including around $550 billion for power grids, while investment in battery storage should exceed $100 billion.

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ECB Chief Economist Sees Persistent Impact on Inflation from Iran War

The Euro currency symbol is seen prior to a press conference after an ECB's governing council meeting in Frankfurt, Germany, Dec. 18, 2025. (AP)
The Euro currency symbol is seen prior to a press conference after an ECB's governing council meeting in Frankfurt, Germany, Dec. 18, 2025. (AP)
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ECB Chief Economist Sees Persistent Impact on Inflation from Iran War

The Euro currency symbol is seen prior to a press conference after an ECB's governing council meeting in Frankfurt, Germany, Dec. 18, 2025. (AP)
The Euro currency symbol is seen prior to a press conference after an ECB's governing council meeting in Frankfurt, Germany, Dec. 18, 2025. (AP)

The energy shock caused by the Middle East conflict will likely have a persistent impact on inflation even if there is a quick solution to the war, the European Central Bank's chief economist, Philip Lane, said on Thursday.

While oil prices historically tended to revert to original levels after a burst of increases, the current episode may be different as energy costs may stay elevated with countries restocking inventory or diversifying their energy mix, he said.

"We had ‌an overnight, fairly ‌quick and big decline in global oil ‌supply, ⁠which has been ⁠masked until now by inventories," Lane said at a conference hosted by the BOJ and its think tank in Tokyo.

"Even if the initial energy shock starts to reverse, the second round (effects) will be with us for a while," he said.

With the energy shock pushing up prices, financial markets have fully priced in ⁠two hikes in the ECB's 2% deposit ‌rate and see a roughly 50% ‌chance of a third move over the next year. Economists are more ‌cautious and see just two hikes, followed by a cut ‌in mid-2027, a Reuters poll showed.

Lane said there could be some policy lessons from past energy shocks, such as that rising energy costs could push up inflation abruptly and cause "all sorts of non-linear" mechanisms ‌that broaden price hikes.

"But it's not the same non-linearity we had four years ago," when ⁠supply disruptions ⁠from the Ukraine war and strong demand from the COVID re-opening pushed up inflation, he said.

Central banks must acknowledge any substantial shocks and their potential impact on inflation, but avoid overreacting in setting monetary policy, Lane said.

"You have to be skillful in terms of looking at monetary transmission, consumer confidence and all these different mechanisms," he said.

While some inflationary pressures from a supply shock do calm down over time, it was important for central banks to make sure "there's no persistent belief in the population or among price-setting sectors that inflation is going to be too high for too long," he said.

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Dollar Firms to One-Week High as Gulf Tensions Flare, Yen Nears Intervention Zone

US dollar banknotes are seen in this illustration taken March 24, 2026. (Reuters)
US dollar banknotes are seen in this illustration taken March 24, 2026. (Reuters)
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Dollar Firms to One-Week High as Gulf Tensions Flare, Yen Nears Intervention Zone

US dollar banknotes are seen in this illustration taken March 24, 2026. (Reuters)
US dollar banknotes are seen in this illustration taken March 24, 2026. (Reuters)

The dollar firmed to a one-week high on Thursday after Middle East tensions ratcheted up following fresh US strikes on Iran, while the yen softened toward a level that triggered central bank intervention last month.

Iran's Revolutionary Guards said they targeted a US airbase after what they described as an early morning US attack near Bandar Abbas airport, Tasnim news agency reported, while Kuwait's army said its air defenses were intercepting hostile ‌missile and ‌drone threats.

That followed news that the US military ‌carried ⁠out new strikes targeting ⁠an Iranian drone operation that it said posed a threat to US forces and commercial shipping in the Strait of Hormuz.

Oil prices rebounded and the safe-haven dollar steadied as hopes of a swift resolution to the war faded, with investors now increasingly expecting the greenback to break higher as the Federal Reserve shifts its focus to battling inflation amid elevated energy prices.

"Geopolitics and ⁠the subsequent inflation risks remain a key concern," Alex ‌Saunders, Citi's head of global quant ‌macro strategy, wrote. "We continue to see a trim in the USD underweight."

The euro was 0.2% ‌lower at $1.1600, while the pound was down nearly 0.3% at $1.3392.

The risk-sensitive ‌Australian dollar weakened 0.4% to $0.7111to a one-week low, and the New Zealand dollar was down 0.3% at $0.58831.

The dollar index, which measures the greenback's strength against a basket of six major peers, strengthened 0.17% to 99.464, near its highest level since ‌May 21.

Markets will now look ahead to today's release of the Fed's preferred inflation gauge, the core PCE ⁠deflator, which ⁠will help shape the broader interest rate outlook.

The yen weakened to as far as 159.610 per dollar on Thursday, the lowest since April 30 and within sight of the 160 level that triggered intervention by Japanese authorities last month.

That intervention bought policymakers some breathing room, but questions linger over its lasting impact, said Tony Sycamore, market analyst at IG.

"The broader question is whether it was worth it for what essentially amounts to just a single month's relief. And furthermore, will authorities have the stomach to write a similar-sized cheque if the 160 level is breached again in the coming sessions?" he said.

Markets are pricing a roughly 70% chance of a quarter-point interest rate rise at the BOJ's June 15–16 policy meeting, LSEG data showed.