Oil prices have climbed to $100 a barrel, a level not seen since July, as the conflict in the Middle East intensifies. This surge is attributed to increased tensions between the US and Iran, including US forces destroying Iranian tankers and Iran-backed Houthis attacking Saudi cities, which has set oil installations ablaze and wounded over 70 people. Brent crude futures, the international benchmark, rose 2.1% to surpass the $100 mark, while U.S. West Texas Intermediate crude also saw significant gains, heading towards $95.
The escalation in oil prices has reignited concerns about global inflation, which could pressure central banks, particularly the Federal Reserve and the European Central Bank, to raise interest rates. The European Central Bank is already anticipated to increase rates on Thursday. Investors are closely watching the US consumer price index report due on Friday, as it will heavily influence the Fed's decision on potential rate hikes next week.
Fawad Razaqzada, a market analyst at FOREX.com, noted that the ongoing Middle East conflict is fueling worries about supply disruptions and the inflationary impact of higher oil prices. He added that resilient US employment combined with renewed pressure from energy costs presents hawkish signals for the Fed. A sustained rise in oil prices risks undoing progress on inflation, potentially squeezing consumers and businesses, and is already contributing to a decline in equity markets.
