Oil Surges Above $100, Reviving Inflation Worries Amid Middle East Tensions
Global markets experienced another volatile week due to escalating Middle East tensions and rising oil prices. Brent crude surged above $100 per barrel, reaching around $110 by Friday and gaining nearly 13% on the week. Higher energy costs can feed directly into inflation, forcing central banks to maintain or raise interest rates.
US inflation pressures increased with the August PPI coming in above expectations at 0.4% month-on-month and 5.4% year-on-year. This has pushed markets to price a higher probability of a September Fed rate hike to around 70%. The ECB also raised its 2026 inflation forecast to 3.0%, highlighting how the Middle East energy shock is forcing central banks to reassess the inflation outlook.
US stocks came under pressure as higher oil prices, Treasury yields, and Fed-hike expectations weighed on growth and technology shares. However, Apple's recent iPhone launch helped its stock gain around 3.6% despite concerns over pricing and consumer demand.