Oil Surge Triggers Global Market Repricing of Inflation Risks

Global markets are repricing inflation risks as oil prices surge above $100 per barrel. The increased energy costs are pushing global bond yields upward and reinforcing expectations of central bank tightening.

In the US, initial jobless claims fell to 187K, the lowest since 1969, indicating a resilient labor market. However, the tariffs imposed on around 60 economies could add to inflationary pressures and raise business costs.

The dollar strengthened alongside higher Treasury yields, while Canada's CPI eased to 2.8 percent YoY from 3.2 percent YoY. The European Central Bank held its deposit rate at 2.25 percent but signaled potential tightening in September as euro-area inflation remained at 2.8 percent YoY.

The Composite PMI rose to 51.9 in the euro area, indicating a return to private sector expansion. However, renewed escalation in the Middle East and associated rise in oil and gas prices threaten to undermine the recovery by intensifying inflationary pressures.