$100 Oil Price Surge Sparks Inflation Fears Amid US-Iran Conflict
Escalating tensions between the US and Iran have pushed Brent crude oil to its highest level since July, surpassing $100 a barrel. The spike in oil prices has stoked fears of energy-driven inflation, putting pressure on global stocks and bond markets.
The benchmark crude contract rose to $100.19 on Wednesday, its highest level since the memorandum of understanding between the US and Iran was in place on July 24. However, not everyone is convinced that this price surge will have a major impact on demand.
Manish Kabra, a multi-asset strategist at Societe Generale, said $100 was a 'psychological threshold' rather than an economic one. He believes that crude needs to hit $150 to create a major drawback in the demand cycle, which could lead to rising diesel prices and fuel inflation.
The surge in oil prices has added to concerns that higher inflation will lead central banks to adopt more restrained monetary policies. The European Central Bank is expected to hike interest rates on Thursday, and next week the US Federal Reserve will meet to determine whether they will do the same.