European equities stumble under threat of Middle East strikes, ECB hike

Brent crude prices surged near $100 per barrel on September 9, causing Asian stock markets to remain cautious. Intensified Middle East attacks heightened inflation concerns before the release of significant U.S. consumer price data. The Japanese yen strengthened to nearly a seven-month high against the dollar on September 8, as traders exited short positions, awaiting potential faster Bank of Japan interest rate hikes.

A potential rush of repatriation of Japanese capital was also anticipated. The euro rose ahead of the European Central Bank’s policy decision on September 10, with expectations of a rate hike amid inflationary pressures from the Iran conflict. Iranian-backed Houthis in Yemen attacked Saudi cities on September 8, further complicating a US ally in the conflict.

Simultaneously, US forces targeted Iranian oil tankers, and Iran retaliated by striking a US base in Jordan. Oil prices climbed for four consecutive days on September 9, exceeding $1 in early trade. Brent crude futures reached $99.49 a barrel, the highest level since late June. West Texas Intermediate crude rose to $94.63 a barrel, up $1.60.

Sydney stocks fell by about 0.3%, while Hong Kong's Hang Seng dropped 0.6% and mainland Chinese blue chips gained 0.2%. Regional benchmarks saw some recovery, with Japan's Nikkei up 0.6% after a 1.7% drop on September 8. South Korea's KOSPI rose 1.6% and Taiwan's TAIEX increased 0.6%. Japanese cable manufacturers surged following a Verizon and Corning deal on high-density optical fiber.

Overnight, the Philadelphia Semiconductor Index jumped 1.3%, despite declines on Wall Street’s main indexes. S&P 500 futures added 0.1% after falling 0.6% on September 8. Analysts noted indecision in major macro markets, with tight ranges and a consolidation pattern. Chris Weston, head of research at Pepperstone, stated that $100 for Brent crude now appears highly achievable.

Inflation worries have pressured global equities and lifted bond yields as traders price higher odds for central bank tightening. The US Federal Reserve is seen as having a quarter-point hike or hold on September 16, while the Bank of Japan is expected to increase by a quarter point on September 18. The yen rose around 0.2% to 153.66 against the dollar, nearing its previous session high of 152.89.

The euro climbed 0.1% to $1.1629, settling in its narrow three-week range. The British pound remained stable at $1.3545, with the Bank of England to announce its latest decision on September 17, with economists predicting a hold for the remaining part of 2026. Bitcoin edged higher at $78,680.60. Gold gained 0.3% to around $4,368 per ounce.