ECONOMYNEXT – Murban crude, the favoured light crude used in Sri Lanka’s state-run refinery has soared 10.7 percent after Israel attached Iran leading to a retaliatory strikes that may continue for a time.
Over the past week Murban crude jumped from 66.40 dollars a barrel to around 72.42 dollars, though marginally below the December level of 74 dollars barrel.
Murban crude is still lower than December numbers. Before US sanctions, Iranian light crude was the favoured feedstock for Sri Lanka’s refinery.
Sri Lanka has an automatic fuel price formula to protect the economy. If prices are not raised, the Ceylon Petroleum Corporation will be forced to take more loans, which tends to trigger forex shortages if they are re-finance by printed money from the central bank.
In the past when stronger credit demand drove up interbank rates the central bank has printed money to defend its policy rate, triggering forex shortages and currency crises.
In 2018 to defend its rate cuts and flexible inflation targeting with printed money, the central bank triggered a currency crisis even fuel prices were raised.
In 2015 to defend its rate cuts, the central bank printed money when oil prices fell and retail prices were lowered under ‘data driven monetary policy’.
The attacks by Israel came as talks between the US and Iran were breaking down.
Israel launched missile and air attacks on key Iranian target assassinating senior military leaders and nuclear scientists, apparently with the full knowledge of the United State President Donald Trump.
In a post on his truthsocial.com platform Trump said a 60-day deadline he gave to Iran had run out on Friday.
Iran launched waves of missile and drones Friday night with several penetrating Israeli defences.
Retaliatory air strikes dubbed, Operation True Promise 3, “will continue for as long as necessary,” Islamic Republic of Iran News Agency quoted senior general Ahmad Vahidi as saying.
Ironically, Trump came to office promising to end wars. However his attempts promote peace talks in Russia has failed, and a new war has been ignited to which US resources will be diverted.
The US and Israel’s Western allies usually support Israel, and some analysts observed that the hard line leader Benjamin Nethnayahu had now successfully dragged the US into the war.
Trump has undermined a global post World War II order, the NATO alliance and does not respect international treaties, leading to dangerous power vacuum, allowing aggressive leaders to flex their muscles and threaten their neighbors.
The US had diverted 20,000 ant-drone missiles promised to Ukraine by the Biden administration to the Middle East, President Zelensky said a few days earlier.
The US had also moved ships to the Middle East and evacuated non-essential personnel and families from the region. (Colombo/June14/2025)
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