Oil: Higher prices drive yields and Dollar – MUFG

Oil prices have surged back to near recent highs around USD110 per barrel, according to Lee Hardman at MUFG. This increase is attributed to frustration over the lack of advancement in a US-Iran deal aimed at reopening the Strait of Hormuz. Additionally, geopolitical tensions, such as attacks near Riyadh, further contribute to the risk factors that keep energy prices high and fuel global bond market sell-offs.

The price of oil has been one of the most significant movers recently, reaching around USD110 per barrel. This rise is due to disappointment surrounding the absence of progress towards resolving the US-Iran conflict and reopening the Strait of Hormuz. US and Iranian negotiators have been discussing a potential agreement where Iran would allow the Strait to reopen, while the United States lifts the blockade on Iranian ports.

Consequently, the Australian Dollar (AUD) is holding steady near 0.7000 at the beginning of a new week, trading close to its lowest point since August 4. This stability is due to the strength of the US Dollar, which is being supported by rising oil prices, increased inflation concerns, and expectations of a potential Federal Reserve rate hike in October.