Iran War Is Testing How Long the Fed Can Look Past Higher Energy Prices
Oil and bond markets climbed as traders priced in higher inflation and a greater than 50% chance of rate hikes at major central banks, analysts said.
- On Wednesday, Centcom launched a second round of airstrikes on Iran in three days, citing attempted attacks on shipping in the Strait of Hormuz and military bases in the Middle East, including a Marines base in Jordan.
- These attacks intensify economic pressure on Iran as Centcom enforces a blockade on Persian Gulf ports and applies tougher sanctions on Iranian technology procurement and the "shadow fleet" of vessels securing foreign oil sales.
- Brent crude rose about 1 per cent to almost US$96 a barrel on Wednesday morning, while rising energy prices drove bond yields to their highest levels since 2008, heightening global inflation concerns.
- Iranian Ministry spokesman Esmaeil Baqaei claimed an attack killed or injured 50 wedding guests, which Centcom denied; President Donald Trump warned Iran on Tuesday that further retaliation would bring a much harder strike.
- Markets anticipate interest rate hikes from central banks including the Federal Reserve, while a Massachusetts Amherst Poll shows more than two-thirds of respondents disapprove of President Trump's handling of the unpopular war and rising cost-of-living prices.
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"Equity markets are starting September in a fairly typical fashion," namely "with a wave of selling," notes Neil Wilson, an analyst for Saxo UK, against a backdrop of very high energy prices and bond yields. North Sea Brent crude, considered the global benchmark, is now trading above $95 a barrel. Iran attacked US military bases in the Gulf on Wednesday following a series of US airstrikes against it, the second in just a few days. "The events …
The Wall Street Journal reports that the escalation of the US-Iran conflict is once again pushing up oil prices on the world market. Brent crude, the international energy benchmark, rose nearly 1.4 percent on Monday to around $92 per barrel.
The renewed escalation of tensions in the Middle East following new US airstrikes against Iran has reduced risk appetite in global markets. Asian stock markets saw sharp losses, while Brent crude oil prices rose above $95 per barrel. The US 10-year Treasury yield reached its highest level in nearly three years. Concerns that the escalating conflict following the renewed US airstrikes against Iran this week could affect energy supplies, particula…
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