Brent oil passes US$100 on Mideast flare-up, stoking inflation fears

Brent oil prices soared above US$100 per barrel for the first time since late July, amid escalating tensions between the United States and Iran. This surge in crude prices - a 3 percent increase to US$101.21 per barrel - has sparked concerns about potential hikes in interest rates to curb inflation. Wall Street markets suffered a decline, with the Dow closing 0.8 percent lower.

European markets also fell, with Paris stocks down nearly 2 percent. European natural gas prices spiked to their highest level since early 2023, exceeding 80 euros per megawatt-hour. The US$100-a-barrel level for oil is considered a psychological threshold that impacts business and consumer costs, potentially slowing economic growth.

Kathleen Brooks, a research director, highlighted the significance of this price point. Main US oil contract, West Texas Intermediate, reached over US$96 per barrel. Blame for the price hike falls on retaliatory strikes between the US and Iran. U.S. diesel prices hit a record US$5.94 per gallon, pressuring President Donald Trump ahead of midterm elections.

The focus is now on upcoming U.S. inflation data expected to fuel expectations of a Federal Reserve rate hike. European Central Bank is also expected to raise eurozone interest rates. Inflation concerns have pushed up yields on government debt. The 10-year U.S. Treasury bond yield rose to its highest level since 2023, despite the Treasury announcing a buyback program, which disappointed investors.

An escalating trade dispute between Washington and Ottawa, including an incoming import ban on alcoholic beverages, adds to market worries. Iran launched fresh attacks against U.S. targets in retaliation for American strikes on Iranian oil tankers, deepening the conflict. Meanwhile, Apple unveiled its first foldable phone, but shares fell 0.3 percent.