Driven by growing expectations for an interest rate hike by the Japanese central bank, the yield on two-year Japanese government bonds rose to its highest point since 2008 on Monday.
The two-year yield, which is highly sensitive to monetary policy shifts, at one point rose as much as 2.5 basis points to 1.015 percent during trading on Monday. Meanwhile, the Japanese yen strengthened against the U.S. dollar, appreciating to as high as 155.4 yen per dollar.
This comes as Bank of Japan (BOJ) Governor Kazuo Ueda said the central bank will weigh the "pros and cons" of raising its policy rate when its board meets later this month.
Markets are now pricing in an 80 percent chance that the BOJ will raise interest rates at its upcoming policy meeting on December 19, compared with just a 30-percent probability two weeks ago.
The BOJ has drawn criticism for moving too slowly to raise rates, as Japan's inflation rate has remained above the central bank's 2-percent target for an extended period.
The yen has faced significant pressure in recent months, depreciating roughly 5 percent against the U.S. dollar since the start of the fourth quarter, according to Bloomberg data, further fueling calls for policy tightening.
Japan’s 2-year government bond yield hits highest level since 2008
Japan’s 2-year government bond yield hits highest level since 2008
The price of aluminum, a key industrial metal used in automotive manufacturing, construction and packaging, has been climbing as production cuts in the Gulf region, logistical constraints and Iranian attacks on two regional producers over the weekend tightened supply.
On March 31, the benchmark London Metal Exchange (LME) three-month price for aluminum rose to 3,535 U.S. dollars per metric ton, a year-on-year increase of around 40 percent.
Iran's Islamic Revolutionary Guard Corps (IRGC) said on Sunday that they launched missile and drone strikes on aluminum plants in Bahrain and the UAE that are linked to the U.S. military and aerospace industries, in retaliation for U.S.-Israeli attacks on Iranian steel factories.
Emirates Global Aluminium issued a statement saying that its Al Taweela site in the Khalifa Economic Zone in Abu Dhabi was severely damaged after Iranian strikes, with some employees injured.
Aluminum Bahrain confirmed in a statement on Sunday that some of its facilities were struck by Iranian attacks, resulting in injuries to two employees.
The two aluminum plants have a combined annual output of 3.2 million tons, more than half of the approximately 6 million tons of aluminum produced every year by Gulf Cooperation Council (GCC) member states.
The region is a key source of aluminum supply, accounting for about 9 percent of global production.
Goldman Sachs on Tuesday raised its LME aluminum price forecast from 3,200 U.S. dollars to 3,450 U.S. dollars per ton for the second quarter of 2026 after the attacks on the facilities.
Goldman Sachs also predicted a global primary aluminum market supply deficit of 570,000 tons in 2026, a sharp turnaround from its previous forecast of a 550,000-ton surplus.
Analysts point out that the aluminum market is currently facing multiple shocks, with shipping in the Strait of Hormuz disrupted, aluminum production facilities in the Gulf damaged or even shut down, and production in other parts of the world currently limited.
The impact will also spread to downstream enterprises in the coming months, with higher-cost aluminum alloys, primarily used in the aerospace, automotive, and construction industries, facing the most constrained supply, analysts said.
The Gulf region has long been a significant source of these high-end products, particularly for the European market, and also supplies manufacturers in the United States.
Aluminum prices climb as effects of Middle East tensions spread through global economy
