Oil Price Surge Fuels Fresh Bond Market Selling Pressure
Global bond markets are experiencing fresh selling pressure due to a 3% surge in oil prices, which has heightened concerns about inflation that may prompt central banks to raise interest rates. The European Central Bank is widely expected to hike rates when it meets on September 9-10.
The jump in Brent crude to just over $92 a barrel followed a US attack on an Iranian island in the Strait of Hormuz, which kept alive the risk of further interest rate increases from major central banks. Federal Reserve Chairman Kevin Warsh's hawkish speech at Jackson Hole on Friday boosted bets on a September Fed rate rise.
Markets have lifted the probability of a September Fed rate increase to around 60%, with analysts expecting the US economy to continue growing, albeit at a slower pace. The European Central Bank is also expected to hike rates in September, with euro zone inflation data this week likely to cement market pricing for a rate hike.