Oil Price Spike Triggers Inflation Fears Amid Rate Hike Expectations

Share markets in Asia declined on Monday as oil prices surged due to supply concerns. Brent crude futures rose 3.1% to $107.84 a barrel, while US crude increased by 2.8% to $102.85 per barrel. The spike in oil prices has stoked inflation fears globally.

The recent attack on a Saudi oil pipeline and an advance by Yemen's Houthis have threatened to worsen the wartime disruption to global energy supplies. A meeting between Iran and Gulf Arab states to discuss a deal on opening the Strait of Hormuz was postponed, further testing nerves in the market.

Investors are bracing for possible interest rate hikes in both the US and Japan this week. The US Federal Reserve is expected to raise rates by 25 basis points on Wednesday, with an 86% chance of a hike priced in by markets. Michael Feroli, chief US economist at JPMorgan, expects the Fed to hike twice this year, in September and December.

However, Ben Snider, chief US equity strategist at Goldman Sachs, remains optimistic about corporate earnings supporting Wall Street if borrowing costs rise. Strong corporate earnings have historically provided a boost to equities during periods of rate hikes.