Rate Hike Odds Soar as Oil Prices Surge

Investors are increasing their bets that the Federal Reserve will raise interest rates as soon as next week due to rising oil prices and inflation concerns. The surge in oil prices, triggered by escalating tensions with Iran, has boosted the chances of a rate hike from 13% last week to 38%, according to CME Group data based on federal funds futures.

Fed Chair Kevin Warsh is under pressure to show that the US central bank is prepared to contain inflation. Mark Cabana, head of US rates strategy at Bank of America, said: 'The July Fed meeting is definitely live. It is very questionable whether monetary policy is restrictive at the moment.'

Robert Sockin, chief US economist at PGIM, described next week's meeting as 'almost a 50-50 call'. Brent crude has breached $100 a barrel for the first time since May, and prices for petrol and diesel have shot higher in recent weeks.