News & market updates

Sri Lanka's rubber sector faces mounting cost, demand, disease and labour pressures, with 2025 rubber export earnings down to about USD 945m from ~USD 1.01bn in 2024. Removal of SVAT, a 15% wage rise, disease outbreaks and higher energy costs have suppressed prices, cut replanting and threaten long-term viability without policy support.

CBSL’s H1 2026 Systemic Risk Survey of 147 firms found short-term confidence in the financial system remained positive but medium-term confidence softened, with respondents reporting a higher perceived probability of high-impact negative events amid natural hazards and recent geopolitical tensions and oil-price shocks.

The Central Bank of Sri Lanka will issue a review report tomorrow assessing the potential impact of the ongoing Middle East crisis on Sri Lanka’s economy, the president told Parliament; the evaluation aims to clarify possible effects on the country’s financial sector.

Fitch says Middle Eastern sovereign ratings can likely withstand a short (under one month) regional conflict but prolonged damage to energy infrastructure or extended hostilities could pressure sovereign ratings. Fitch assumes the Strait of Hormuz would be effectively closed during the conflict, weighing on oil and gas exports (notably for Bahrain, Kuwait, Qatar and Iraq) and disrupting tourism and air travel.

Colombo Stock Exchange plunged at Tuesday open and trading was halted after the S&P SL20 fell 5.53% (to 6,269) and the ASPI dropped 5.27% (to 22,483.76). The halt ran from 09:31–09:36 with an auction until 10:01; brokers blamed Middle East tensions and possible supply-route disruptions.

U.S. stocks finished narrowly mixed after U.S. and Israeli air strikes on Iran triggered volatile trading; U.S. crude rose about 6% to $71.23, boosting energy and defense while tech stocks later led gains.

Gold rose for a fifth straight session, with spot gold up 1% to $5,377.21/oz, as investors sought safe havens amid escalating U.S. and Israeli strikes on Iran and fears the conflict could widen. The reported closure of the Strait of Hormuz threatens a fifth of global oil flows, lifting other precious metals and disrupting shipping and air transport.

Oil prices rose for a third day as the widening U.S.-Israeli conflict with Iran and threats to shipping through the Strait of Hormuz raised supply disruption risks; Brent was $78.83/bbl, up $1.10 (1.4%). Insurers cancelling coverage and attacks on tankers/refineries are keeping refined product futures elevated.

Opposition Leader Sajith Premadasa has convened an urgent meeting of Opposition MPs on the Middle East crisis as Brent crude jumped as much as 13%, trading about $76.48/bbl midday Tokyo. The session will assess the safety of Sri Lankans in the region and potential knock-on effects for Sri Lanka.

U.S. and Israeli strikes on Iran sent oil sharply higher (WTI ~+8% to $72.70, Brent ~+9% to ~$79.19), dragging global equities lower and lifting gold and the dollar; bond yields fell while higher-than-expected wholesale inflation may complicate Fed rate-cut timing.

Sri Lanka expects fuel queues to disappear from March 3 after authorities moved to curb hoarding and ensure adequate supply; officials and CPC say there are over one month of fuel stocks and no QR code will be introduced.

Global airline shares plunged after U.S. and Israeli strikes on Iran disrupted travel and sent oil prices roughly 7% higher, forcing closures of major Middle Eastern hubs (Dubai, Doha) and causing widespread flight cancellations and rerouting.

Brent crude jumped about 10% to roughly $80/bbl after U.S. and Israeli strikes on Iran, and analysts warned prices could reach $100/bbl if the Strait of Hormuz is closed, with OPEC+ agreeing a modest 206,000 bpd output increase.

US and Israel launched strikes on Iran, raising the risk of a wider Middle East conflict that could push Brent crude (around $73) toward roughly $80 and, if supply is disrupted, possibly near $100. Markets may see heightened volatility, safe-haven flows into gold and Treasuries, and pressure on Gulf equities and airlines.

A US-Israel strike on Iran and ensuing Strait of Hormuz disruption sent Brent crude up over 7% (above US$90) and led the Ceylon Petroleum Corporation to raise diesel prices (Auto +Rs4, Super +Rs6), threatening Sri Lanka's fuel supplies, tea exports and imports of construction materials.

Asia markets rose (MSCI Asia-Pacific ex-Japan ~+1%), led by Korean chipmakers as AI sentiment improved; investors also watched the yen and BOJ/Fed rate outlook. Traders awaited the US State of the Union while oil gained ~0.75% and gold was flat.

The government says the coal tender complied with procurement rules and has recovered over $4.27m in penalties for lower-quality coal shipments. Ten ships have arrived (eight unloaded), six discharge reports received, Cotecna was appointed for inspections and a technical committee will review reports.

Asian stocks slipped after a Wall Street selloff driven by uncertainty over U.S. tariff policy and AI-related risks; MSCI's Asia-Pacific ex-Japan index was down about 0.2%.

Agriculture Minister K.D. Lalkantha said inferior-quality coal was supplied under a recent tender but denied any fraud or corruption in the procurement. He said authorities will use established mechanisms to recover losses but gave no details on supplier, volumes or estimated financial impact.

Sajith Premadasa alleged the ninth imported coal shipment was substandard, producing 250 MW (with a subsequent test at 275 MW) versus an expected ~300 MW, and called for accountability over procurement from a South African supplier.

Wall Street futures and the dollar fell after confusion over new U.S. tariffs — including a surprise shift to a 15% global rate — revived 'sell America' flows. Nvidia's upcoming results will test the AI sector, while gold rose, oil eased and Treasury moves raised concerns about a roughly $170bn revenue hit that could widen the fiscal deficit.

LAUGFS Gas PLC says LPG supply is normalising after government support to operationalise its Hambantota Terminal; cargo shipments under a new supply arrangement have been secured and distribution restoration is under way.

Secondary bond-market yields edged higher last week, driven by profit-taking, with medium–long tenors rising (e.g. 01.10.32 to 10.25%, long end up to 10.92%). The weekly T-bill auction was fully subscribed raising Rs.66.00bn while the 91-day yield fell to 7.66%; USD/LKR closed ~309.40.

Opposition Leader Sajith Premadasa alleged eight recently imported coal consignments supplied to the Ceylon Electricity Board were below required standards and cost the CEB more than Rs. 8 billion, calling for an independent investigation. He warned substandard coal could raise fuel use and operating costs, damage equipment, force additional imports or diesel generation and lead to higher electricity tariffs.

Asian stocks slipped and oil climbed as a U.S. military buildup around Iran pushed Brent crude above $72/bl; the dollar posted its biggest weekly gain in four months after mixed U.S. data and Fed minutes.

Minister says there is no LP gas shortage after LAUGFS (LGL.N0000) halted supply for several days due to an operational limitation at Hambantota; LAUGFS is rerouting shipments and Lanka IOC/Litro (LIOC.N0000) has raised daily supply from 1,200 mt to 1,500 mt, with multiple shipments due.

LAUGFS Gas says it has secured stocks and rerouted LPG shipments to Colombo Port after operational limitations at its 30,000-metric-ton Hambantota import terminal, assuring uninterrupted domestic LP Gas supply. The company is working with authorities to expedite the terminal's release.

The Ceylon Electricity Board estimates direct losses of Rs. 2,796 million from four off-spec coal shipments to the Lakvijaya plant, with only Rs. 1,037 million identified as recoverable, leaving net exposure of about Rs. 1,759 million. CEB also flagged maintenance and operational damage (air pre-heater blockages, boiler tube and turbine blade wear).

Ceylon Electricity Board has requested a 13.56% electricity tariff increase for 1 April–30 June 2026 to cover an estimated Rs. 15,847 million deficit. CEB forecasts total generation of 4,578 GWh (hydro 1,218 GWh, thermal 1,957 GWh, other renewables 1,402 GWh) and sales of 4,230.3 GWh.