Soaring Oil Prices Put Fed on Track for September Rate Hike

The recent surge in crude oil prices is pushing the Federal Reserve towards a rate hike in September, according to data from CME Group, as reported by The National today. Around 90% of traders anticipate a 25 basis point increase, following the European Central Bank's 25 basis point rate hike last week. The Middle East conflict continues to fuel inflation, with the ECB predicting inflation will stay above target for an extended period in its latest decision.

Analyst Derek Tang warns that the prolonged risk of a prolonged Iran war makes relief for energy prices unlikely. Oil prices are currently above $100, after a 8% gain last week, with Brent crude briefly surpassing $108 per barrel in Asian trading. Fed officials are wrestling with whether to balance the pace of inflation reduction or implement a rate hike, a situation described as being on a "knife edge" by Oxford Economics' chief U.S. economist.

ING analysts also support a rate hike, citing the August inflation reading at 3.4%, far above the 2% target. Higher oil prices have driven up fuel prices, with diesel reaching an all-time high of $6 per gallon last week, while the national average for gasoline hits $4.3120 per gallon, and diesel averages $6.2040 per gallon.