Middle East Conflict Fuels Inflation Fears Ahead of Fed Meeting

The ongoing Middle East war continues to disrupt global markets, with Iran taking an aggressive stance. The conflict has driven up oil and diesel prices, pushing market rates higher and unsettling equity markets.

The week ahead brings three G10 central bank meetings, including the Bank of Japan's meeting that is expected to be a non-event for the markets.

However, the Federal Reserve's upcoming meeting may bring more volatility. The US has seen hotter-than-expected inflation readings, with August's consumer price index (CPI) coming in at 0.4% month-on-month and 3.4% year-on-year.

The core inflation index, which excludes volatile food and energy prices, rose 0.290% month-on-month, exceeding expectations of 0.2%. This could lead to an interest-rate hike at the Federal Reserve's meeting next week and potentially more to follow.