An oil tanker operated on behalf of Trafigura was struck by a missile on Friday after transiting the Red Sea, a company spokesperson told CNBC in statement.

The Marlin Luanda, a petroleum products tanker vessel, was struck by the missile in the Gulf of Aden. Firefighting equipment on board is being used to suppress a fire in one of the cargo tanks, the spokesperson said.

“We remain in contact with the vessel and are monitoring the situation carefully,” Trafigura said. “Military ships in the region are underway to provide assistance.”

Houthi militants claimed responsibility for the attack, describing the vessel as a “British oil ship.” Trafigura said the vessel is flagged under the Marshall Islands.

The militants used a “number of appropriate naval missiles, the strike was direct and resulted in the burning of the vessel,” the Houthis’ military spokesperson Yahya Saree said in a statement.

Houthi militants in Yemen have attacked commercial vessels transiting the Red Sea since November in support of Palestinians. The U.S. and UK began a series of airstrikes against the militia on Jan. 11 aimed at deterring the Iranian-backed group.

Houthi militants fired a ballistic missile at the U.S. Navy destroyer Carney in the Gulf of Aden earlier on Friday, according to U.S. Central Command. The missile was shot down by the Carney. No injuries or damage were reported, according to CENTCOM.

Several of the world’s major oil tanker companies paused traffic toward the Red Sea immediately after the U.S. and Britain began launching airstrikes against the Houthis earlier this month.

U.S. crude oil on Friday settled at $78.01 a barrel to close out its best week since Sept. 1. The global Brent benchmark settled at $83.55 a barrel, posting its best week since Oct. 13.

The West Texas Intermediate contract for March was last up 74 cents, or 0.96%, at $78.10 a barrel. The Brent March contract was trading at $83.73 a barrel, up $1.30 or 1.58%.

Oil futures have not responded dramatically to escalating tensions in the Middle East so far because there has not been a major disruption to supply. Analysts have warned that a direct confrontation between the U.S. and Iran could send prices significantly higher.

Robert Thummel, portfolio manager at Tortoise Capital, told CNBC on Thursday that the market is not pricing enough geopolitical risk into crude prices. Thummel said WTI should really be trading at $85 right now given the tensions in the Middle East.

Oil prices rose after Britain and the United States carried out military strikes against targets in Houthi-controlled areas of Yemen, as tensions in the Red Sea mount further.

Global benchmark Brent was trading around 4% higher at 6 a.m. ET Friday, $80.55 a barrel, while the U.S. West Texas Intermediate futures climbed 4.22% to $75.07 per barrel.

“These targeted strikes are a clear message that the United States and our partners will not tolerate attacks on our personnel or allow hostile actors to imperil freedom of navigation in one of the world’s most critical commercial routes,” U.S. President Joe Biden said in a statement Thursday evening.

While the U.S. has carried out strikes on Iranian proxies in Syria and Iraq since the outbreak of the Gaza war, this would be the first known strike against the Iran-backed Houthis in Yemen.

The Houthis have been attacking vessels in the Red Sea, targeting global shipping vessels including those from the U.S. and Israel, in retaliation for the war in Gaza that has so far killed nearly 23,000 people in the Palestinian enclave.

Major shipping companies stopped traversing the Suez Canal and Red Sea routes in early December, choosing to reroute via southern Africa instead. That’s resulted in longer and more expensive journeys which pushed up ocean freight rates.

In a televised speech on Thursday, the leader of Yemen’s Houthis, Abdul-Malik al-Houthi, vowed that any American attack on the group will not go without response.

“We will confront the American aggression. Any American aggression will never remain without a response,” he said, cautioning that the response will be greater than “at the level of the recent operation” that the group is carrying out at sea.

In announcing the strikes on Thursday, Biden vowed he “will not hesitate to direct further measures to protect our people and the free flow of international commerce as necessary.”

Oil prices rose on Tuesday after Iran dispatched a warship to the Red Sea, as the situation remains tense in the critical waterway for global shipments that has seen vessels attacked by Yemen’s Houthi rebels.

Global crude benchmark Brent jumped 2.5% to $78.97 a barrel, while the U.S. West Texas Intermediate gained 2.5% to $73.43 per barrel during Asia trading hours. 

Iran on Monday announced it sent the Alborz destroyer through the strategic Bab al-Mandeb Strait, the country’s state media reported, without elaborating on details of the warship’s mission. It added that operations are periodically conducted in the Red Sea to secure shipping routes.

The move comes after the U.S. Navy destroyed three boats of Iran-backed Houthi rebels, killing 10 militants, according to an AP report. The Navy was responding to a distress call by Singapore-flagged vessel Maersk Hangzhou which had come under Houthi fire, the U.S. Central Command said in a statement.

In a statement by a rebel spokesman on Sunday, the Houthi group maintained that the boats were engaged in “official duties to secure maritime routes”, a news channel owned by the rebels stated. 

“Any escalation of conflict in this region is certainly going to add more of a risk premium on Brent,” Bernstein’s Senior Energy Analyst Neil Beveridge told CNBC. He noted, however, that there won’t be any major impact just yet.

“We haven’t seen the Iranian naval incursions before. And as long as it really doesn’t lead to any escalation, then I don’t really see any significant impact at this level,” he added.

The Houthi group has been attacking vessels in the Red Sea, targeting Israeli ships and other vessels headed to or from Israel, in retaliation for the country’s war in Gaza that has so far killed nearly 22,000 people there.

Major shipping companies stopped traversing the Suez Canal and Red Sea routes in early December, choosing to reroute via southern Africa instead — a longer and more expensive journey with ocean freight rates hitting as high as $10,000 per container. 

German container shipper Hapag-Lloyd said Friday it would continue to divert its vessels around the Suez Canal.

However, the launch of Operation Prosperity Guardian, a multinational maritime force, by the U.S, has bolstered the confidence of shipping companies. Danish shipping giant Maersk said Sunday it would resume operations in the Red Sea and the Gulf of Aden.

This report is from today’s CNBC Daily Open, our new, international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.

A fierce winning streakU.S. stocks rose Tuesday to hit fresh winning streaks, their longest in three years. But Asia-Pacific markets were mixed Wednesday. Japan’s Nikkei 225 ticked down 0.1% despite rising confidence among large Japanese manufacturers, according to a Reuters Tankan survey. Meanwhile, Australia’s S&P/ASX 200 climbed 0.2% a day after the country’s central bank raised rates by 25 basis points.

Microsoft closes at a highMicrosoft shares climbed 1.12% to hit $360.53, a record high. It’s the eighth consecutive day in which the technology giant’s shares rose, a streak unseen since January 2021. Investors cheered Microsoft CEO Satya Nadella’s surprise appearance at OpenAI’s event, where he encouraged developers to build with Microsoft’s Azure cloud infrastructure.

‘Absolutely booming’ Chinese sectorChina’s economy hasn’t recovered from its pandemic blues. But in the sectors of “electric vehicles and everything around sustainability and renewable power technology,” China is “absolutely booming,” Standard Chartered CEO Bill Winters told CNBC. Relatedly, China’s truck industry is increasingly using vehicles with assisted-driving technology, a critical step toward monetizing the nascent business.

Peak, not pause?The U.S. Federal Reserve, European Central Bank and the Bank of England all paused interest rate hikes in recent weeks. This breather comes after dramatic hikes over the last 18 months as central banks grappled with unruly inflation. Some market watchers, in fact, think this lull in hikes isn’t so much a pause but the peak in rates — and are turning their attention to when central banks will start cutting.

[PRO] Buy BYDOver the past 18 months, Warren Buffett’s Berkshire Hathaway has sold more than half its stake in Chinese electric vehicle maker BYD, according to stock filings. Despite that, analysts still think BYD’s a stock worth buying — and some even raised their price targets for the firm.

Last month’s sudden surge in Treasury yields and oil prices — both of which tend to suppress investors’ appetite for stocks — looks to be ending. No, scratch that — the increases aren’t just ending, they’re ebbing.  

Look at oil: Contracts for both West Texas Intermediate and Brent futures fell around $3. WTI’s now at $77.01 a barrel while Brent’s $81.44, their lowest since July. That’s almost $10 per barrel less compared with a month ago, when prices jumped on fears triggered by the Israel-Hamas conflict.

Meanwhile, the 10-year Treasury yield fell around 10 basis points to 4.569% and the 2-year yield slipped 3 basis points to 4.915%. As Treasury yields serve as the benchmark for interest rates on loans and cash investments, sinking yields generally benefit rate-sensitive companies more. In other words: the Magnificent Seven Big Tech. Amazon led the pack, shooting up 2.13% yesterday.

That explains why the Nasdaq Composite jumped 0.9%, more than the S&P 500’s 0.28% gain and the Dow Jones Industrial Average’s 0.17% increase. Still, that’s not downplaying the movements. The S&P and Dow are enjoying their seventh consecutive session of gains, while the Nasdaq’s basking in its eighth.

If the U.S. Federal Reserve does indeed steer the economy to a soft landing, in which inflation is contained below 2% without the economy contracting, then there could be a further rally in stocks, said HSBC. Within periods of soft landings, the S&P has jumped, on average, 22% in the space between a pause and six months after rate cuts begin, noted HSBC’s global equity strategist Alastair Pinder.

And that immaculate disinflation isn’t just a dream. Chicago Federal Reserve President Austan Goolsbee told CNBC, “Because of some of the strangeness of this moment, there is the possibility of the golden path … that we got inflation down without a recession.”

Both the economy and markets have truly acted in strange, unprecedented ways ever since the pandemic. From one of the worst years for stocks and bonds in 2022, to a widely heralded bull rally in the S&P — and then a correction — in 2023. And I haven’t even started on the U.S. labor market and inflation numbers. Strange may be new and unsettling, but it isn’t necessarily bad.

The World Trade Organization’s director-general warned that the ongoing Israel-Hamas conflict will impact global growth if it spills over to the wider Middle East region.

In an interview with CNBC aired on Monday, Ngozi Okonjo-Iweala said: “If it spreads beyond where it is now, to the rest of the Middle East, there will be an impact.”

“Remember that this region is also the source of a lot of the world’s energy with respect to natural gas as well as oil, which is still very much in use and all over the world. So you will see an impact on global growth, on global trade,” she added.

“We do hope it does not amount to that. We’re praying for de-escalation and peace,” she told CNBC’s Martin Soong on the sidelines of the Group of 7 meeting in Osaka, Japan.

Israel’s military campaign in the Gaza Strip was triggered by the brutal terrorist attack by Hamas militants in southern Israel on Oct. 7 that killed 1,400 people, including Americans. Nearly 240 people have been captured and taken as hostages to Gaza.

Economists have cautioned that any possible escalation of the Israel-Hamas war poses a major disruption to the global economy, and could drive up energy prices and disrupt key trade routes.

Trade growth is already “quite grim” due to the “fall in aggregate demand across the board,” said Okonjo-Iweala.

The WTO cut its trade growth forecast for 2023 amid a global manufacturing slowdown. In October, the organization scaled back on growth estimates in global merchandize trade for this year due to a continued slump that started in the fourth quarter of 2022.

Global merchandize trade volume is now projected to grow by 0.8% this year, less than half of the 1.7% increase forecasted in April. The 3.3% growth projected for 2024 remains nearly unchanged from the previous estimate.

“The rebound from China has not been as robust after the pandemic as we hoped. We have the real estate crisis in China. European Union growth is slower than we had also hoped,” said the WTO director-general.

“The U.S. seems to be doing okay but still, there’s the issue of aggregate demand falling across the board in most regions and both sectors and persistent inflation with interest rates going up higher for long,” she added.

The International Energy Agency on Thursday said that oil markets are likely to remain on edge as the Israel-Hamas war persists, with investors closely monitoring the potential for output disruption in the Middle East.

The world’s leading energy watchdog said in its latest monthly oil market report, that while the conflict had not yet had a direct impact on physical supply, energy market participants would “remain on tenterhooks” as the crisis unfolds.

“The Middle East conflict is fraught with uncertainty and events are fast developing,” the IEA said in its report.

“Against a backdrop of tightly balanced oil markets anticipated by the IEA for some time, the international community will remain laser focused on risks to the region’s oil flows,” the energy agency added.

Noting a “sharp escalation in geopolitical risk,” the IEA said it would continue to closely monitor oil markets and “stands ready to act if necessary to ensure markets remain adequately supplied.”

In the event of an abrupt oil supply shortage, the IEA’s response includes member countries releasing emergency stocks and/or implementing demand restraint measures.

Israel is not a major oil producer and no major oil infrastructure runs close to the Gaza Strip.

The IEA notes, however, that the Middle East accounts for more than one third of global seaborne oil trade, and the Israel-Hamas conflict has ratcheted up fears the fighting may affect regional energy production.

The IEA report comes as the Israel-Hamas conflict enters its sixth day and follows a devastating and coordinated assault from Palestinian militant group Hamas on southern Israel over the weekend. Israel has since pulverized Gaza with airstrikes and is expected to launch a ground offensive against Hamas in the region in the coming days.

Israel has also ordered the “complete siege” of the Gaza Strip, seeking to stop the supply of electricity, food, water and fuel to the already blockaded population of roughly 2.3 million people.

As a result of the ongoing Israeli-Hamas war, at least 1,200 Israelis have been killed, with more than 2,700 injured, according to Israel’s military. Meanwhile, the Palestinian Ministry of Health says 1,203 people in Gaza have been killed, with 5,763 injured.

When oil markets opened following the surprise attack by Hamas on Israel on Oct. 7, the IEA said traders priced in a $3 to $4 risk premium. However, prices have since stabilized.

Crude futures traded higher on Thursday.

International benchmark Brent crude futures with December expiry traded 0.8% higher at $86.5 per barrel at around 9 a.m. London time, while front-month November U.S. West Texas Intermediate crude futures rose 0.6% to trade at $83.99 per barrel.

UAE oil giant ADNOC — run by the president of the COP28 climate conference — is expected to spend more than $1 billion every month this decade on fossil fuels, according to new analysis by international NGO Global Witness.

This is nearly seven times higher than its commitment to decarbonization projects over the same timeframe, the research says.

ADNOC, which recently became the first among its peers to bring forward its net-zero ambition to 2045, disputes Global Witness’ analysis and says the assumptions made are inaccurate.

It comes ahead of the COP28 climate summit, with Dubai set to host the U.N.’s annual conference from Nov. 30 through to Dec. 12. Viewed as one of the most significant climate conferences since 2015’s landmark Paris Agreement, COP28 will see global leaders gather to discuss how to progress in the fight against the climate crisis.

The person overseeing the talks, Sultan al-Jaber, is chief executive of ADNOC (the Abu Dhabi National Oil Company) — one of the world’s largest oil and gas firms. His position as both COP28 president and ADNOC CEO caused dismay among civil society groups and U.S. and EU lawmakers, although several government ministers have since defended his appointment.

Global Witness’ analysis, provided exclusively to CNBC, found that ADNOC is planning to spend an average of $1.14 billion a month on oil and gas production alone between now and 2030 — the same year in which the U.N. says the world must cut emissions by 45% to avoid global catastrophe.

It means that ADNOC is forecast to spend nearly seven times more on fossil fuels through to 2030 than it does on “low-carbon solution” projects.

By 2050, the year in which the U.N. says the entire world economy must achieve net-zero emissions, ADNOC is projected to have invested $387 billion in oil and gas. The burning of fossil fuels is the chief driver of the climate emergency.

A spokesperson at ADNOC told CNBC via email: “The analysis of, and assumptions made, regarding ADNOC’s capital expenditure program beyond the company’s current five-year business plan (2023 to 2027) are speculative and therefore incorrect.”

The Abu Dhabi energy group announced in January this year that it would allocate $15 billion for investment in “low-carbon solutions” by 2030, including investments in clean power, carbon capture and storage and electrification projects.

Global Witness arrived at its projections by analyzing ADNOC’s forecasted oil and gas capital expenditure, exploratory capital expenditure and operational expenditure for the period from 2023 to 2050. The data was sourced from Rystad Energy’s UCube database.

Rystad’s data is not available to the public, but is widely used and referenced by major oil and gas companies and international bodies.

“Fossil fuels companies like to burnish their green credentials, yet they rarely say the quiet part out loud: that they continue to throw eyewatering amounts at the same old polluting oil and gas that is accelerating the climate crisis,” said Patrick Galey, senior investigator at Global Witness.

“How [al-Jaber] can expect to lecture other nations on the need to decarbonise and be taken seriously is anyone’s guess, while he continues to provide vastly more funding to oil and gas than to renewable alternatives,” he added.

“He is a fossil fuel boss, plain and simple, saying one thing while his company does the other,” Galey said.

The United Nations Framework Convention on Climate Change did not immediately respond to a request for comment on the analysis conducted by Global Witness. The Conference of the Parties (COP) is the supreme decision-making body of the UNFCCC.

Al-Jaber was the founding CEO of Abu Dhabi state-owned renewable energy firm Masdar, which works in more than 40 countries worldwide and has invested in or committed to invest in renewable energy projects with a total value of over $30 billion.

Speaking earlier this year, al-Jaber said the main priority for the COP28 summit will be to keep alive the fight to limit global heating to 1.5 degrees Celsius.

The Paris Agreement aims to limit the increase in the global average temperature to “well below” 2 degrees Celsius above pre-industrial levels and to pursue efforts to limit global heating to 1.5 degrees Celsius. Beyond the critical temperature threshold of 1.5 degrees Celsius, it becomes more likely that small changes can trigger dramatic shifts in Earth’s entire life support system.

The International Energy Agency says no new oil, gas or coal development is compatible with the goal of curbing global heating to 1.5 degrees Celsius.

In response to a request for comment from CNBC, an ADNOC spokesperson said that energy demand is increasing as the world’s population is expanding. “All of the current energy transition scenarios, including by the IEA, show that some level of oil and gas will be needed into the future,” the spokesperson said.

“As such, it is important that, in addition to accelerating investments in renewables and lower carbon energy solutions, we consider the least carbon intensive sources of oil and gas and further reduce their intensity to enable a fair, equitable, orderly, and responsible energy transition. This is the approach ADNOC is taking,” they added.

The spokesperson said its 2022 upstream emissions data confirmed the energy group as one of the least carbon-intensive producers worldwide. The company will seek to further reduce its carbon intensity by 25% and target near zero methane emissions by 2030, they added.

“As we reduce our emissions, we are also ramping up investments in renewables and zero carbon energies like hydrogen for our customers,” the spokesperson said.

A separate report published in April last year by Global Witness and Oil Change International found that 20 of the world’s biggest oil and gas companies were projected to spend $932 billion by the end of the decade to develop new oil and gas fields.

At that time, Russian state company Gazprom was estimated to spend the most on fossil fuel development and exploration projects through to 2030 ($139 billion), followed by U.S. oil majors ExxonMobil ($84 billion) and Chevron ($67 billion).

Oil prices surged Monday to their highest since mid-April, following an attack on a key Russian oil export hub and extended production cuts by OPEC kingpin Saudi Arabia and Russia.

Over the weekend, Ukraine launched a naval drone attack on Russia’s port of Novorossiysk, a critical hub on the Black Sea for Russian oil exports. Ukraine did not immediately respond to CNBC’s request for comment.

In addition, the world’s top oil exporter Saudi Arabia last Thursday extended its voluntary crude oil output cut of a million barrels per day to the end of September. Saudi Arabia’s million barrel per day cut was implemented in July through to August, and the cut “can be extended or extended and deepened,” the state-owned Saudi Press Agency said last week.

“Now that we’ve seen supplies come off, I think I think we’ll see much higher prices,” said Josh Young, chief investment officer at Bison Interests, an oil and gas investment firm.

Russia, the world’s second largest oil exporter, also pledged Thursday to voluntarily trim oil exports by 300,000 million barrels per day in September.

Global benchmark Brent futures traded slightly below the flatline at $86.17 a barrel — the highest since April 14. U.S. West Texas Intermediate futures dipped 0.1% to $82.74 per barrel, hovering close to mid-April highs.

“I actually think they’re going to be quite volatile,” Young said, adding that prices will be much higher over the next five years.

“We might see all time-highs and prices crash as we go through this dynamic of insufficient supply relative to demand,” he said.

Citi’s Ed Morse was slightly more optimistic about crude oil supplies after September.

Morse, global head of commodity research at the bank, says Saudi Arabia and Russian output is “likely to come back” in October, and that oil prices will hit $90 per barrel at most this quarter.

“We just don’t see demand growth being that spectacular,” Morse said, projecting that there will not be “this huge incremental spurt in Chinese demand.”

LONDON — Oil major BP on Tuesday reported a nearly 70% year-on-year drop in second-quarter profits on the back of weaker fossil fuel prices, echoing a trend observed across the energy industry.

The British energy major posted second-quarter underlying replacement cost profit, used as a proxy for net profit, of $2.6 billion. Analysts had expected BP to report second-quarter profit of $3.5 billion, according to estimates collated by Refinitiv.

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The second-quarter result compared with a profit of $4.96 billion recorded in the first three months of the year and with the $8.5 billion logged in the second quarter of 2022.

BP boosted its dividend by 10% to 7.27 cents per ordinary share for the second quarter. The energy giant also said it would repurchase $1.5 billion of its shares over the next three months.

Oil majors have failed to match the bumper profits posted during the same period of last year amid weaker commodity prices.

British rival Shell and French oil major TotalEnergies on Thursday reported a steep drop in second-quarter profit, while U.S.-based Exxon Mobil’s second-quarter profit slumped 56% year-on-year.

The West’s five largest oil companies raked in combined profits of nearly $200 billion in 2022, as oil and gas prices soared following Russia’s full-scale invasion of Ukraine. For its part, BP reported annual record profit of $27.7 billion for the full year of 2022.

Oil and gas prices came under pressure in the first half of this year, however, as global economic jitters outweighed supply-demand fundamentals.

Shares of BP are roughly 1.7% higher year-to-date.

With Germany already in a technical recession, economists predict that GDP growth is set to stagnate for the rest of the year and have painted a gloomy picture for Europe’s largest economy.

In May, the German statistics office revised its first-quarter GDP readings from zero to -0.3%, which followed a 0.5% contraction in the last quarter of 2022.

But a faltering gross domestic product isn’t the only figure that suggests that the German economy is stuttering.

Here are five charts that show how the historical engine of Europe is faring.

The consumer price index measures the average change in the price of goods and services purchased by consumers, and is a solid indication of monetary value trends.

Germany’s inflation rate is expected to hit 6.4% for June, according to provisional data from the German statistics office, which is an increase from the 6.1% recorded for May. Despite the projected increase, the figure is still a significant decrease from its near-50-year high of 8.8% in October, but remains well above the country’s 2% target.

“It looks like, for at least the next couple of months, inflation will stay on very high levels. Expect maybe for the second half that inflation might come down to a certain extent,” Joachim Nagel, president of Germany’s central bank, the Bundesbank, told CNBC in March.

While inflation may start to sink, Germany’s central bank estimates that it won’t reach 2% until at least 2025. German consumers have felt the impacts of long-lasting high inflation as they’ve had to make their euros stretch further, but the financial pressure on households doesn’t look set to ease any time soon.

Germany’s place in the euro zone means that its interest rates are determined by the European Central Bank, giving the country limited autonomy when it comes to tackling sticky inflation. 

While the government can’t necessarily control inflation, it can mitigate the impact it has on the German population, Sylvain Broyer, chief EMEA economist at S&P Global Ratings told CNBC.

“What the fiscal authority can do in the face of high inflation is to alleviate the pain of inflation on the most fragile citizens,” he said.

The government introduced multiple relief packages in 2022, designed to help Germans cope with the rising cost of living brought about by high inflation, including increased child benefits and one-off payments for students and pensioners.

The European Central Bank has consistently raised rates since July 2022 as it attempts to bring down inflation across the region, and the main rate currently sits at 3.5% after a further 25-basis-point hike on June 15.

The current bout of inflation can largely be attributed to high global energy prices, which came as a result of pent-up pandemic demand followed by a post-pandemic recovery. Russia’s full-scale invasion of Ukraine then brought huge uncertainty to the market and caused a further spike in prices.

While some energy sources are starting to settle to their pre-war prices, the energy crisis is continuing to impact some of Germany’s biggest industries.

“Energy intensive industrial production is reduced substantially. The automobile sector [has also been] having difficulties for some time and substantial restructuring is still ahead,” Endowed Chair of Monetary Economics at Goethe University in Frankfurt, Volker Wieland, told CNBC.

Utilities costs are still expected to increase in 2023, according to a January report by Allianz. Electricity bills are expected to increase by around 35% this year, while industrial power prices are set to rise by around 75%, the report said.

German exports unexpectedly nudged lower in May, coming to a total of 130.5 billion euros ($142 billion), which is a 0.1% drop compared to April, according to provisional data by the German statistics office. Analysts polled by Reuters had anticipated a 0.3% uptick month-on-month after April export figures surprised to the upside.

“The global interest rate hikes are naturally also dampening demand for products from Germany,” Veronika Grimm, professor of economics at Friedrich-Alexander-Universität Erlangen-Nürnberg, told CNBC.

But the fall in exports may not be as bad as the headline numbers suggest, S&P Global Ratings’ Broyer told CNBC, and he attributed the dip to a price effect reflecting factors such as the recent lower cost of energy.

“The foreign trade figures for May show that the terms of trade are continuing to recover. The German economy has already recouped half of the losses in terms of trade incurred over the last two years and the energy crisis,” he added.

China is Germany’s main business partner, with the countries having traded goods worth 298.9 billion euros between one another in 2022, and Germany has been buoyed by China’s much-hyped, post-pandemic re-opening.

But Europe’s biggest economy has shown hesitation in further strengthening its trading relationship with Beijing, with the country’s Economy Minister and Vice Chancellor Robert Habeck saying that while trade is open, Germany is not “a stupid market” and needs “to be careful.”

Germany has the largest aging population in Europe, with a growing percentage of Germans in retirement, and that demographic is only set to grow in the coming decades.

The number of people at retirement age (67 years or older) will rise by roughly 4 million by the middle of the 2030s, according to the German statistics office, bringing the total number of retirees to at least 20 million.

The growing elderly population has exacerbated concerns about the country’s pension system, which is “on the verge of collapse” according to Rainer Dulger, president of the Confederation of German Employers’ Associations, who spoke to Germany’s Bild newspaper in October.

Contributions to Germany’s public pension plans are expected to represent 12.2% of the nation’s GDP by 2070 under the current system, according to The 2021 Ageing Report published by the European Commission. That’s a 2-percentage-point increase on the 2019 figure, and one of the highest forecasted changes in the European Economic Area.

Combined with a labor shortage crisis that has prompted the country to overhaul its immigration rules to bring in more workers, and enthusiastic engagement with digitalization to make the most of the workers it does have, Germany’s quickly-aging population is having ripple effects throughout the country’s economy.