Brent Crude Oil Rises Above $100 A Barrel As Middle East Conflict Intensifies

• Brent crude futures breached $100 a barrel on Wednesday for the first time since late July, as Iran and the U.S. hit tankers in the ​biggest wave of attacks on shipping since the war began, threatening to worsen the ongoing impairment of energy supplies from the Middle East.
• Front-month Brent crude futures were up $3.40, or 3.5%, at $101.32 a ‌barrel after touching a high of $101.55. U.S. West Texas Intermediate crude was up $3.45, or 3.7%, at $96.48 a barrel, highest since early June.
• Since late May, oil benchmarks have generally traded well below the $100-per-barrel psychological threshold, reflecting expectations that the conflict would remain on a low simmer. Optimism rose in particular after the U.S. and Iran came to a temporary agreementto cease attacks, even though a permanent peace deal had not been reached. That calculus has been shifting of late with the resumption of strikes. Iran ​said on Wednesday it had attacked 10 ships near the Strait of Hormuz and the U.S. sank five Iranian oil tankers, in a sharp escalationof the six-month-old war.
• Futures prices are moving closer to physical crude and fuel markets, where the reality of tight supply has been apparent for the bulk of the conflict. Since the Iran war began on February 28, Brent has surged as high as $126.41 a barrel, a peak reached on April 30 but had only briefly touched $100 a barrel in late July after retreating below that threshold in late May.
• Higher oil prices have also translated into higher bond yields and borrowing costs for the U.S. government and for consumers by extension. On Tuesday, two-year Treasury yields, which are among the most sensitive to potential inflation, hit their highest level since November 2024. The 10-year Treasury yield, which heavily influences consumer borrowing rates, rose to 4.812%, which was just short of its highest level since November 2023.
• Traders are now pricing in about a 60% chance of an interest rate hike at the Fed's September 15 to 16 policy meeting, according to the CME FedWatch Tool, up from about 50% before the jobs data. Stocks were less affected by oil prices than bonds were. Nonetheless, the S&P 500 closed down 0.58%, while the Nasdaq Composite ended the day lower by about 0.3%.

(Source: Reuters)