Rate Hike Bets Surge, Oil Prices Soar Amid Inflation Fears

European markets started the week on a sour note as investors ramped up their bets for a Fed rate hike, with expectations jumping to nearly 90% ahead of the main event this Wednesday.

Oil prices surged again, with Brent crude topping $108 and WTI crude rising above $103, amid continued disruption in the Strait of Hormuz and the shutdown of a key Saudi oil pipeline.

This increase in oil prices is fueling inflation fears across markets, causing bond yields to rise while signaling to market players that the Fed will likely raise interest rates this week.

The US dollar is seen running up to a two-week high as more hawkish Fed bets filter in, with USD/JPY up 0.6% and EUR/USD down 0.4% on the day.