Renewed US-Iran tensions have pushed Brent crude above $US90 a barrel, intensifying inflation fears and weighing on stock markets worldwide.
Brent futures rose to $US91.05 a barrel in Asian trading on Tuesday, after settling 2.7 per cent higher at $US90.49 in the previous session. US West Texas Intermediate crude also climbed, reaching $US86.59 a barrel.
The latest rise followed a resumption of military hostilities between the United States and Iran, reviving concerns about disruption to energy supplies from the Middle East. US President Donald Trump has threatened further strikes against Iran, according to Reuters.
Higher oil prices have added to pressure on government bonds, as investors assess the risk that more expensive energy will prolong inflation and delay interest-rate cuts. The yield on the benchmark 10-year US Treasury note rose to 4.78 per cent, its highest level in almost 20 months.
Asian equities came under pressure, with Japan’s Nikkei slipping 0.2 per cent and Hong Kong’s Hang Seng falling 0.7 per cent in early trading. European markets were also unsettled after long-term borrowing costs in Germany and France reached their highest levels in 15 years.
Investors are also reassessing the outlook for US monetary policy after Federal Reserve chairman Kevin Warsh signalled that interest rates may need to rise if inflation fails to return to the central bank’s 2 per cent target.
Markets are now pricing in a greater-than-even chance of a US rate increase this month, a shift that has strengthened the prospect of further pressure on shares and bonds if oil prices remain elevated.
