Middle East Conflict Drives Oil Prices Higher, ECB Decision Looms Large
The Middle East conflict continues to escalate, driving up oil prices and sparking concerns about renewed inflationary pressures. Brent crude futures have surged over 10%, while West Texas Intermediate (WTI) crude futures have risen more than 8%. The Houthi movement in Yemen attacked a Saudi oil tanker in the Red Sea, implementing a blockade on Saudi vessels passing through the Bab el-Mandeb Strait and threatening oil supply.
US President Trump has warned Iran that as long as Iranian forces attack ships within the Strait of Hormuz, the US will bomb 'a bridge or a power plant' in Iran. The Republican-controlled House launched legislative proceedings for a budget reconciliation bill, proposing $95 billion for related war expenditures.
The European Central Bank's decision today is expected to have a significant impact on markets, with investors pricing in an over 85% probability of a 25 basis point rate hike in September.