News & market updates

Oil prices plunged after US President Trump called off planned strikes on Iran, with WTI at $79.77/bbl (‑5.88%) and Brent at $83.47/bbl (‑5.07%). The drop reflects hopes of de‑escalation, even as OPEC+ approved a ~188,000 bpd September output increase and regional shipping risks persist.

Sri Lanka's current account swung to a $245m deficit in 1H 2026 from a $1.4bn surplus a year earlier as the merchandise trade deficit widened 67% to $5.49bn (exports $6.9bn, imports $12.4bn). Higher fuel imports (1H fuel bill $3.17bn, +58.8% YoY), a weaker services surplus and Middle East-related import pressures drove the deterioration; gross official reserves were $6.5bn and the rupee was 7.8% weaker YTD.

Sri Lanka's monthly current account deficit widened to $149mn in June 2026 (third consecutive monthly deficit), leaving a H1 cumulative deficit of $245mn versus a surplus in H1 2025. The merchandise trade gap widened as import expenditure (fuel imports +40.2% YoY) outpaced export growth, tourist earnings fell and remittances rose; official reserves were $6.5bn and the rupee had depreciated 7.8% YTD by end-July.

Headline inflation rose to 7.3% in July 2026 from 6.8% in June, breaching the Central Bank's 7% upper target. The CBSL said higher housing rents and food inflation, and a c.47% fuel price rise after Middle East supply disruption, drove the increase; the central bank last month kept the policy rate unchanged and expects inflation to remain above target in the near term.

The Central Bank reported a monthly current account deficit of US$149 million in June 2026 (third consecutive month) and a cumulative H1 deficit of US$245 million. The deterioration was driven by a wider merchandise trade deficit (US$5.5bn H1), a 40.2% rise in fuel import costs y/y, a 9.9% drop in tourist arrivals in June, and a 7.8% YTD depreciation of the rupee.

Sri Lanka's state petroleum corporation (CPC) kept domestic fuel prices unchanged for the month and is absorbing diesel losses of about Rs63-70 per litre as global diesel prices have risen ~158.9% vs pre-war while local diesel is up ~135.9%. CPC blamed the Russia-Ukraine war, refinery outages and higher Red Sea shipping costs; petrol has risen ~141% since February.

Oil prices fell as Brent dropped $1.44 to $87.59/bbl and WTI fell $1.59 to $82, though both are set for about a 20% monthly rise, as increased flows through the Strait of Hormuz and other chokepoints offset Middle East tensions.

The Federal Reserve left interest rates unchanged in a split decision, leaving bond markets uncertain and Asian stocks trading volatile after a week-long rout. Brent futures slipped below $90 amid Middle East fighting and longer-dated U.S. Treasury yields rose to multi-decade highs.

Oil prices slipped as markets weighed Gulf supply flows: Brent fell 1.06% to $89.78/bbl and WTI fell 0.76% to $83.82/bbl amid escalating Gulf attacks, while analysts note crude is still reaching markets via alternative routes.

The LMD-PEPPERCUBE Business Confidence Index rose 19 points to 151 in July, reversing the prior month's drop though still below the 12-month average (170) and July 2025 level (190). The report also notes World Bank income reclassification, LP gas price cuts and ongoing global risks (Middle East) shaping sentiment.

Deputy Minister Anil Jayantha Fernando said S&P's favourable assessment reflects policy consistency, stronger fiscal management and improved debt management but warned structural vulnerabilities remain, notably a Rs.2,500 billion interest bill that limits development spending, energy dependence and exposure to external shocks. He added government revenue had reached 63.5% of the annual target by July and foreign exchange reserves and the T&C assessment have improved.

Oil and Natural Gas Corporation (ONGC) has begun drilling India's first deepwater exploratory well, MN-DW18-1-H-D, in the Mahanadi offshore basin about 23 nautical miles from its Konark discovery, part of the DeepX/Samudra Manthan campaign to boost domestic hydrocarbon production and reduce import dependence.

S&P affirmed Sri Lanka's sovereign ratings at 'CCC+/C' with a stable outlook on July 27, 2026, and upgraded the transfer and convertibility assessment to 'B-'; it flagged a heavy interest-to-revenue burden (~45.6%). The agency noted resilient GDP growth but vulnerabilities from high debt, external shocks (Middle East war, Cyclone Ditwah) and a 100bp policy-rate hike to anchor inflation.

Oil prices fell over $1/bbl after the US and Iran paused attacks, with Brent down $1.47 (1.66%) to $86.89 and WTI down $1.45 (1.76%) to $81.16, their lowest since July 20. Analysts warn supply risks remain as Red Sea traffic has dropped and tensions could resume.

S&P Global affirmed Sri Lanka's long- and short-term sovereign ratings at 'CCC+/C' with a stable outlook and revised the transfer and convertibility assessment to 'B-'. The agency warned higher energy costs and Middle East risks could pressure growth and external balances, and forecasts 3.8% GDP growth in 2026.

The CSE opened higher with the ASPI up 0.07% at 21,187.22 and the S&P SL20 up 0.10% at 5,948.74; market turnover exceeded Rs.2bn and foreigners were net buyers (Rs.15.7m). John Keells, Hayleys and HNB were key contributors while capital goods and banking led turnover.

SLT Group CEO Riyaaz Rasheed warned that Sri Lankan corporates and government bodies underinvest in cybersecurity and urged earlier spending as AI-driven 'agentic' threats rise. He also flagged semiconductor shortages, energy costs and talent shortfalls as constraints on telecom investment.

CSE indices rose modestly and turnover reached Rs.2.07 billion, led by John Keells Holdings with Rs.661 million traded; ASPI closed up 14.48 pts at 21,187.22 and S&P SL20 gained 6.18 pts to 5,948.74.

Brent fell 3.6% to $97.10 and WTI fell 3.4% to $89.07 on Friday but both were set for a weekly gain (Brent ~10%, WTI ~8%) as the US‑Iran war escalated.

Oil headed for weekly gains after Houthi attacks on Red Sea tankers and Kazakhstan output cuts; Brent at $99.97 (-0.72%) on course for a 13.5% weekly rise and WTI $91.49 (-0.76%) up about 10.9% this week. The incidents raise risks to the Bab el-Mandeb route and Kazakh exports via the Black Sea.

Solar and wind are now the cheapest sources of new electricity generation in most parts of the world, shifting renewable energy from a reputational choice to a cost-saving, price-stability option for companies. Firms are adopting rooftop solar, PPAs and storage across manufacturing, retail, logistics and large IT users to cut costs and meet rising disclosure rules.

Oil prices rose to a six-week high as US strikes on Iran and Houthi attacks on tankers raised shipping and supply risks, lifting Brent to about $96/bbl and WTI to $88.27. US crude stocks rose by 2 million barrels last week, partly offsetting tightness concerns.

CBSL held the policy rate at 8.75% after its Monetary Board review, citing Middle East-driven commodity price shocks; headline inflation rose to 6.8% YoY in June 2026. The bank said inflation will remain above the 5% target in the near term, stands ready to act, and noted reserves of $6.45bn with some rupee stabilisation.

Companies can cut carbon footprints and reduce energy costs with low-cost steps — upgrading equipment, switching to renewables, optimizing transport, working with suppliers, reducing waste and measuring emissions to find savings.

Sri Lanka's gross official reserves fell to $6.4bn from $6.8bn, with the central bank saying higher import outflows—driven by petrol and vehicle imports—caused the decline rather than FX intervention. The bank expects reserves to recover with incoming IMF, ADB and World Bank disbursements.

World Bank lead economist Dr. Harsha Aturupane warned Sri Lanka must reverse anti-export policies and reconnect with global markets to restore innovation and competitiveness. He cautioned ICT/BPM faces disruption from AI and noted low global value-chain participation (8.1% vs 26% India, 34% Vietnam).

Central Bank kept the Overnight Policy Rate unchanged at 8.75%. Headline inflation rose to 6.8% in June, with higher fuel prices and Middle East tensions posing upside risks; gross official reserves were USD 6.45bn and the rupee has stabilised.

Asian stocks rose, led by a rebound in semiconductor shares as MSCI's Asia-Pacific ex-Japan index gained 1.2% and South Korea's Kospi jumped over 6%. Brent crude nudged to $91.55/bbl and markets are focused on upcoming US earnings and central bank meetings.

Oil prices rose as U.S. strikes on Iran and regional drone attacks raised fears of supply disruptions; Brent was $91.51 and WTI $84.64, with official EIA inventory data due.

The Central Bank of Sri Lanka kept the Overnight Policy Rate (OPR) unchanged at 8.75%. Headline inflation accelerated to 6.8% y/y in June 2026 driven by higher energy and food prices; gross official reserves were USD 6.45bn and the rupee has stabilised.