SYDNEY
Oil prices surged nearly 40% this month amid escalating conflict in the Gulf, reviving inflation fears, rattling bond markets and stoking rate hike expectations globally as Asian shares sank on Friday.
European bourses, however, are headed for a steady open after losses a day earlier. Nasdaq futures slipped 0.3% as bumper results from Intel offered little support in the face of broader worries about oil and rates, while investors grew increasingly uneasy about how much cash the AI boom is burning.
Brent crude slipped 0.4% to $100.3 a barrel, after surging 7% overnight to a two-month high of $102.
Attacks by Houthis on Saudi tankers in the Red Sea risk choking off a second crucial Middle East artery for global oil supplies, alongside Iran’s near-closure of the Strait of Hormuz. President Donald Trump threatened “major military punishment” for Iran and its Houthi allies, with the US military striking Iran late Thursday and early Friday in the 13th consecutive night of attacks.
“Two of the world’s busiest shipping corridors are under threat in the same month, and markets are only just beginning to work out what that means,” said Nigel Green, CEO of deVere Group, a financial advisory firm. “With that ceasefire now collapsed and oil back above $100, the drop which gave the Fed room to relax may already be reversing… This looks less like a short-lived spike and more like a genuine reopening of the inflation question.”
News that the US administration will impose higher tariffs on goods from 60 trading partners also did not help the inflation picture, with 30-year Treasury yields marching towards their highest levels since 2007 and benchmark European borrowing costs climbing to highs last seen in 2011.
Markets bet central banks will have to turn more hawkish, with a one-in-three chance of a rate hike from the Federal Reserve as soon as next week — a sea change from merely a week ago — while a move in September is more than fully priced in.
