US Strike on Iran Sends Oil Prices Soaring Amid Rate Hike Fears

Global markets were mixed on Monday as investors reacted to the US Federal Reserve's potential interest rate hike. The DAX in Germany dropped 0.9% to 26,339.04, while the CAC 40 in Paris edged 0.1% lower to 8,390.43. Markets in Britain were closed for a bank holiday. U.S. futures declined by 0.2%. Oil prices surged more than 3% after US forces struck Iranian rocket launchers on the Strait of Hormuz.

The attack marked a return to open conflict and increased tensions in the region, which had previously been relatively quiet. Brent crude jumped 3.8% to $91.40 per barrel, while U.S. benchmark crude oil rose 3.8% to $86.58 per barrel. Stephen Innes of SPI Asset Management noted that 'the Middle East had finally gone quiet enough for oil traders to start sanding some of the war premium out of crude.' However, Sunday's events put an end to that calm.

Market analysts pointed to Fed Chairman Kevin Warsh's speech on Friday as a contributing factor to Monday's market movements. In his remarks, Warsh reinforced expectations of a potential interest rate hike to combat inflation. The yield on the two-year Treasury jumped to 4.35% from 4.22%, indicating rising expectations for a rate increase.