Oil Prices Surge Towards $100 as Middle East Tensions Escalate

Oil prices surged on Wednesday, pushing Brent crude towards $100 per barrel as Middle East tensions escalated. The rally in oil prices contributed to a subdued mood in Asian stock markets, with Sydney's benchmark index slipping 0.3% and Hong Kong's Hang Seng dropping 0.6%. The yen strengthened against the dollar, nearing its seven-month high, as traders exited short positions in Japanese currency amid expectations of faster Bank of Japan interest rate hikes.

The European Central Bank is widely expected to raise euro zone rates by a quarter point on Thursday, with inflationary pressures from the Iran war driving the decision. The US Federal Reserve has assigned close to even odds for a quarter-point hike or a hold next week, while the BOJ is all but certain of a quarter-point increase two days later.

Chris Weston, head of research at Pepperstone, noted that Brent crude 'now feels like a highly achievable level' and one of the clearest real-time signals for sentiment in the overall market. Inflation worries have weighed on global equities in recent weeks, lifting bond yields as traders price higher odds for central bank tightening.

U.S. consumer price data is due on Friday, with markets closely watching the release for signs of inflationary pressure. Bitcoin drifted higher to change hands at $78,680.60, while gold gained 0.3% to around $4,368 an ounce.