Middle East Conflict Pushes Oil Prices Higher Amid Pipeline Shutdown

Fighting in the Middle East has intensified, causing concerns about global energy supplies and pushing oil prices higher. The Saudi East-West pipeline, a key alternative to the Strait of Hormuz, was temporarily closed after multiple drone attacks on Thursday. Operated by Saudi Aramco, the pipeline stretches over 1,200 km from Abqaiq in the kingdom's Eastern Province to Yanbu on the Red Sea coast.

The disruption has kept oil prices above $100 a barrel, with analysts predicting that they could reach $120 this week. JP Morgan forecasts eight to nine developed economies will hike interest rates by year-end due to elevated inflation pressures caused by higher energy costs.

The European Central Bank (ECB) raised its key interest rates by 25 basis points on Thursday, citing the conflict in the Middle East as a reason for persistent inflation pressures. Christine Lagarde, ECB President, warned that renewed disruption of energy supplies could cause energy prices to rise further and for longer than expected.

The U.S. Federal Reserve is also expected to hike rates by 25 basis points in September, with ING Think forecasting that the move will be driven by a focus on inflation. The Middle East-driven rise in energy prices adds to domestic inflation concerns, reinforcing expectations of a September Fed move.