Brent crude surged past US$100 a barrel for the first time since late July as renewed hostilities between the US and Iran pushed investors to reassess the inflation and interest rate outlook.
Brent rose more than 3% to US$101.21 a barrel, while West Texas Intermediate climbed above US$96. The jump in oil prices weighed on equities, with the Dow Jones Industrial Average falling 0.8% and European markets also ending lower.
The US$100 mark is a key psychological threshold for markets as higher crude prices raise costs for businesses and consumers, potentially weighing on economic growth, according to Kathleen Brooks, research director at XTB.
Patrick O’Hare, chief market analyst at Briefing.com, attributed the oil move to “nettlesome retaliatory strikes between the US and Iran doing the damage”.
US diesel prices have also climbed to a record US$5.94 per gallon, adding further pressure on the domestic economy ahead of the November midterm elections.
The renewed inflation concerns come ahead of US inflation data due Friday, which could influence expectations for the Federal Reserve’s interest rate decision next week.
“The bump in oil prices naturally translates to a bump in concerns about inflation and a possible rate hike by the Fed,” O’Hare said.
European natural gas prices meanwhile jumped to more than €80 per megawatt-hour, their highest level since early 2023, as countries work to replenish supplies ahead of winter.
Iran launched fresh attacks against US targets in the Middle East on Wednesday following American strikes on Iranian oil tankers. Iran’s Revolutionary Guards said they had attacked 20 US vessels attempting to pass through the Strait of Hormuz.
The European Central Bank is also widely expected to raise eurozone interest rates on Thursday, while higher government bond yields reflect growing investor concerns over inflation.
Markets are additionally watching an escalating trade dispute between Washington and Ottawa after the Trump administration announced an incoming import ban covering alcoholic beverages.
Reuters
