As international oil prices surge, U.S. Treasury yields are approaching 5%, heightening tensions in global financial markets. Concerns over inflation have resurfaced due to rising energy prices from the Middle East, coupled with increasing speculation about potential interest rate hikes by the U.S. Federal Reserve, leading to greater volatility in the stock market.
According to the International Financial Center, Brent crude oil prices reached $104.61 per barrel on September 11, an increase of 8.65% from the previous week. During the same period, the yield on 10-year U.S. Treasury bonds rose by 18 basis points to 4.97%. The S&P 500 index fell by 0.80%, while the European Stoxx 600 index dropped by 1.66%. The volatility index (VIX), which reflects market anxiety, increased by 9.02%.
Market attention is focused on the Federal Open Market Committee (FOMC) meeting scheduled for September 15-16. Given the August Producer Price Index and core Consumer Price Index data, expectations for an interest rate hike are growing.
High oil prices and rising interest rates are expected to pose challenges not only for the U.S. but also for major central banks. The European Central Bank (ECB) has indicated that volatility in energy prices due to the Middle East conflict could sustain high inflation for an extended period. Some ECB members have suggested that if oil prices remain elevated, further interest rate increases may be necessary. Similarly, the Bank of Japan is anticipated to consider a 0.25 percentage point rate hike in September.
In the U.S., concerns are mounting that prolonged high interest rates could burden the economy. Bloomberg has analyzed that with rising energy prices and strong consumer spending, achieving the 2% inflation target may be difficult with just one or two rate hikes. While additional tightening could restrict consumption and investment, increasing the risk of recession, hesitance to raise rates could undermine the Federal Reserve's credibility.
However, there are analyses suggesting that the anticipated 20% increase in earnings for S&P 500 companies over three consecutive quarters could offset the macroeconomic pressures from rising Treasury yields and oil prices. Emerging markets may also continue to see upward trends in stock markets and currency values, supported by relatively high interest rates, strong policy credibility, and robust corporate performance.
* This article has been translated by AI.
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