Oil Prices Skyrocket as Middle East Conflict Fears Drive Interest Rates Higher
The global economy is bracing for higher interest rates as investors fear a prolonged Middle East conflict will drive up inflation. Brent crude oil has surged above $107, pushing the UK's bond yields to their highest since 2007.
UK 10-year government bonds now yield 5.37%, making borrowing more expensive. The European Central Bank raised its main interest rate to 2.5% on Thursday, with President Christine Lagarde warning that inflation will be 'longer lasting than we had anticipated.'
The conflict in the Middle East is generating 'inflation pressures', Lagarde said, and policymakers at the Federal Reserve are expected to raise interest rates next week.
As energy costs rise, households face higher bills, intensifying pressure on governments to provide relief. In the US, the average 30-year fixed-rate mortgage hit 6.76% this week, according to Freddie Mac.