Oil Prices Soar as US-Iran Tensions Escalate
Oil prices have surged over 30% in the past week as tensions between the US and Iran escalate, with Brent crude touching nearly $110 per barrel. The Strait of Hormuz has been a focal point, with both sides exchanging strikes, while Yemen's Houthis have targeted Saudi Arabian energy infrastructure.
The attacks on shipping are feeding directly into oil prices, natural gas, and diesel prices, according to Quintex Intel's Stephen Innes. He warned that 'temporary' problems can look through them but what markets hate is when temporary overstays its visa, and oil is starting to do exactly that.'
Investors are bracing for another surge in inflation, which will put pressure on central banks to tighten monetary policy further. The 30-year Treasury yield has reached a new post-2007 peak of 5.36%, while the 10-year rate is close to 5% and nearly at a 19-year high.
The European Central Bank has already lifted rates, warning of an extended period of rising prices, and eyes are now on the Federal Reserve's policy meeting next week. A strong US consumer price index report later Friday is likely to force policymakers to hike interest rates, with investors seeing over 70% chance of a quarter-point lift.