Brent Crude Surges Over 20% in a Week, Breaking $101; US-Israel War Against Iran and Middle East Turmoil Pressure Global Markets

Brent crude on Wednesday broke above the $101-per-barrel threshold for the first time since July, with weekly gains exceeding 20%; on Thursday it touched an intraday high of $101.94. According to Agence France-Presse and France 24, behind this sharp oil price surge lies the continuing fallout of the war launched by the US and Israel against Iran in late February and the simultaneous heating-up of multiple fronts across the Middle East.

Since the war broke out, Iran has been tightening its grip on the Strait of Hormuz and announced this week that it was expanding the no-navigation zone beyond the strait; Washington, for its part, has continued to enforce a counter-blockade against Iranian ports. The two sides have been attacking passing tankers within the strait — Iranian sources claimed they attacked more than ten vessels attempting to transit the waterway on Wednesday. Iran also claimed to have struck a US military base inside Jordan, in retaliation for the US military's destruction of five Iranian oil tankers the previous day; independent verification of these claims remains limited.

The conflict does not stop at the Persian Gulf. Yemen's Houthi forces have attacked Saudi oil facilities, pushing their offensive toward the Bab el-Mandeb strait in the Red Sea, another critical chokepoint; the Houthis said that in a new round of Saudi airstrikes launched on Thursday, they were hit roughly 40 times during the day. With the Strait of Hormuz effectively closed, shipping routes via the Bab el-Mandeb strait are growing in importance for Saudi oil exports.

The cost of the war has already begun to land on ordinary households in tangible ways: US diesel prices have hit a record high approaching $6 per gallon. West Texas Intermediate crude touched $97.79 on Thursday, its highest level since May. The surge in oil prices has reignited expectations of a fresh uptick in inflation, with investors betting that the Federal Reserve and other central banks will be forced to raise rates to rein in prices. The European Central Bank on Thursday was widely expected to raise borrowing costs, and US consumer price data due to be released by the Fed next week is seen as a key variable that could determine whether it raises rates this month.

Against this backdrop of rate-hike expectations, global stock markets have come under pressure. All three major Wall Street indices closed lower on Thursday, European markets likewise slid, and most Asian markets followed them down — Seoul, Hong Kong, Sydney, Shanghai, Singapore, Taipei, Wellington, Bangkok, Jakarta and Manila all fell notably; Tokyo, Mumbai, London and Paris posted modest gains, while Frankfurt edged slightly lower.

Saxo Markets analyst Neil Wilson offered an outlook for investors: "September has historically been the toughest month on Wall Street and, historically, the weakest. After a summer rally powered by record earnings momentum — at least in US equities — that was solid if uneven, the next phase of investor attention will shift more toward the macro picture: central banks and inflation, which very likely means a bumpier period."