US-Iran Tensions Fuel Oil Price Surge Amid Interest Rate Hike Expectations

Oil prices surged as tensions between the US and Iran escalated over the weekend. The Brent crude futures contract advanced by 2.76% to $90.47 per barrel amid reports of a US strike on Iran's Larak Island, followed by Iranian missile attacks on two US air bases in Jordan.

In an interview, the US President stated that Washington would 'hit Iran very hard' in response to the attacks, while Iranian officials declared they possess sufficient military resources to respond forcefully. This re-escalation comes as the US-Iran conflict reaches its sixth month, heightening concerns over persistent energy supply disruptions and rising inflationary pressures worldwide.

The increased tensions have also led to a rise in market expectations of an interest rate hike by the Federal Reserve. The CME FedWatch Tool showed that the market-implied probability of a rate increase at the September meeting rose to 65.4%, compared to a 34.6% likelihood of rates remaining unchanged.

From a technical perspective, the Brent crude futures contract is navigating a highly volatile consolidation phase. Analysts note that the asset continues to trade above its 200-day Simple Moving Average (SMA), suggesting that the primary bullish bias remains intact.