Global oil markets opened the week on a stronger footing as escalating military tensions between the United States and Iran raised fresh concerns about disruptions to energy supplies.
Brent crude climbed 2.8 per cent to $90.53 a barrel, while US West Texas Intermediate (WTI) rose 2.5 per cent to $85.51, extending gains as traders assessed the potential impact of the latest developments in the Middle East.
The price increase followed a US military strike on Iranian rocket launchers near the Strait of Hormuz. Iran was subsequently reported to have retaliated by targeting US military positions in Jordan, adding to concerns that the confrontation could widen.
At the centre of investors’ concerns is the Strait of Hormuz, one of the world’s most important energy corridors. Around one-fifth of global crude oil and gas supplies typically pass through the waterway, meaning any prolonged disruption could have significant consequences for international energy markets.
However, geopolitical tensions were not the only factor influencing investor sentiment on Monday. Markets were also reacting to signals from the US Federal Reserve that interest rates may remain higher if inflation continues to prove difficult to contain.
Federal Reserve Governor Kevin Warsh described inflation, currently at 3.7 per cent, as “concerning” and said the central bank still had “work to do” to return inflation to its two per cent target.
His comments strengthened expectations among some investors that the Fed could take further action on interest rates. Warsh, however, avoided committing himself to a September rate increase, saying he was “committed to a discipline, not to a decision.”
Attention is now shifting towards key US economic data expected over the next two weeks. Investors will closely monitor jobs and inflation figures for indications of whether the Federal Reserve could adjust its monetary policy.
The uncertainty was reflected across global markets. Asian equities delivered mixed performances, with Shanghai rising 0.9 per cent while Tokyo and Hong Kong ended lower.
European markets were similarly uneven during trading, while London’s market remained closed for a public holiday.
For oil traders, however, developments around the Strait of Hormuz remain the immediate concern, as any escalation involving the strategic waterway could place further upward pressure on global energy prices.
