Oil surges above $91 as US-Iran tensions deepen, reviving global inflation fears and putting pressure on stock markets
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Global financial markets have come under renewed pressure after Brent crude climbed above $91 a barrel, as fading hopes of a breakthrough between the United States and Iran intensified concerns over prolonged disruption to global energy supplies. Brent crude rose as high as $91.07 a barrel on Tuesday, 18 August, its strongest level since late July, while US West Texas Intermediate reached about $84.99. Oil has now advanced for three consecutive sessions as investors reassess the likelihood of an early resolution to the conflict.
At the centre of market concerns is the Strait of Hormuz, one of the world's most important energy corridors. Reuters reported that oil flows through the Strait have fallen dramatically from pre-conflict levels, increasing fears that elevated crude prices could persist rather than represent a temporary geopolitical spike.
The consequences are spreading beyond energy markets. Higher oil prices can increase transport, manufacturing and consumer costs, potentially complicating central banks' efforts to contain inflation.
Those concerns have hit global bonds and equities. Europe's STOXX 600 fell around 0.5%, while the MSCI global equity index also declined. US equity futures weakened, with technology stocks particularly vulnerable as rising long-term borrowing costs put pressure on highly valued growth companies.
Long-dated government bonds have experienced an especially sharp sell-off. The 30-year US Treasury yield reached 5.3232%, its highest level in nearly two decades, as investors demanded greater compensation for inflation and fiscal risks.
The latest moves represent a sharp reversal from last week, when falling oil prices and softer inflation data helped push the S&P 500 to a record high.
For investors, the immediate question is whether diplomatic efforts can restore more normal energy flows. Until that happens, oil prices are likely to remain a critical influence on inflation expectations, interest rates and global equity valuations.