Middle East Conflict Sparks Oil Price Surge Amid Worsening Energy Shock

The Middle East conflict has intensified, leading to a surge in oil prices. European Central Bank President Christine Lagarde warned that the energy shock could worsen and push up inflation, potentially prompting a September eurozone interest rate hike.

German Defence Minister Boris Pistorius expressed concerns about 'dire consequences' for oil-importing economies, stating that 'nothing suggests a ceasefire or peace can be reached'. The conflict resumed this month after a brief ceasefire, with Iran and the US battling for control of the Strait of Hormuz. Yemen's Houthis have joined the fight, declaring a blockade on Saudi ports.

The situation is becoming increasingly unpopular in the US, with midterm elections looming in November. The US House of Representatives passed a symbolic vote calling for President Trump to halt the war. Kuwait reported a drone attack against one of its border posts with Iraq, and stated that its air defences were intercepting hostile missile and drone attacks.