As international oil prices surpassed $100 per barrel, the United States has imposed new tariffs on key trading partners, reigniting global inflation concerns. Rising oil prices are increasing production and transportation costs, while U.S. tariffs could elevate the prices of imported goods. This situation raises the possibility that central banks in major economies may delay interest rate cuts or consider further hikes.
Brent Crude Surpasses $100 Amid Middle East Shipping Concerns
On July 23, Brent crude for September delivery closed at $100.69 per barrel, a 7.04% increase, marking the first time it has exceeded $100 since May 22. West Texas Intermediate (WTI) also rose by 6.17%, finishing at $92.19 per barrel. Both oil benchmarks have seen gains for five consecutive trading days.
Concerns over potential disruptions in oil transportation due to military conflicts in the Middle East have driven prices higher. The ongoing U.S.-Iran tensions have significantly reduced shipping traffic through the Strait of Hormuz, while Yemen's Iran-aligned Houthi group reported attacks on two Saudi oil tankers in the Red Sea.
If both the Strait of Hormuz and the Bab el-Mandeb Strait are blocked, two major oil transport routes from the Middle East would be simultaneously threatened. Goldman Sachs has projected that if disruptions in the Strait of Hormuz persist, Brent crude could exceed $120 per barrel in the fourth quarter of this year. They also noted that if the Bab el-Mandeb Strait and the Suez Canal experience disruptions, prices could rise further.
The surge in oil prices has also impacted the global bond market. With rising energy costs potentially driving inflation higher, concerns have grown that central banks may need to maintain elevated interest rates for longer or implement additional hikes, leading to a rise in government bond yields across major economies.
The yield on the U.S. 10-year Treasury note rose to 4.703% on July 23 and climbed to 4.7135% during Asian trading on July 24, the highest level in 18 months. Germany's 10-year bond yield reached 3.205%, the highest since 2011, while the U.K.'s 10-year yield rose to 5.096%, marking a two-month high.
U.S. Imposes New Tariffs on 60 Countries, Including South Korea
Additionally, the U.S. has introduced a new tariff policy that could further increase inflationary pressures. The Office of the U.S. Trade Representative (USTR) announced on July 24 that it would impose tariffs of 10-12.5% on 60 trading partners, including South Korea, under Section 301 of the Trade Act. These countries account for 99.4% of total U.S. imports.
The application of tariffs varies by country. For South Korea, Japan, and Switzerland, the combined tariff rate of the existing most-favored-nation (MFN) tariff and the new tariff will be set at a minimum of 12.5%. If the existing rate is below 12.5%, the additional tariff will be adjusted accordingly; if it is already above 12.5%, no new tariff will be applied.
The same method will apply to the European Union and Taiwan, but the combined tariff rate will be set at 10%. In contrast, 17 countries, including the U.K., Canada, India, and Mexico, will see an additional 10% tariff added to existing rates, while the remaining countries will face a 12.5% additional tariff.
The new tariffs took effect at 12:01 a.m. Eastern Time on July 24. Notably, crude oil, key petroleum products, natural gas, and some fertilizer materials are excluded from this tariff list.
Market analysts believe that high oil prices will increase global energy and transportation costs, while the new tariffs will pressure the prices of imported goods entering the U.S., contributing to inflationary burdens in different ways.
The decisions of major central banks regarding interest rates have also become more complicated. The European Central Bank (ECB) held its deposit rate steady at 2.25% on July 23, cautioning that the impact of rising energy prices on inflation has not yet fully materialized. If oil prices continue to rise, there are discussions about the ECB potentially raising rates further.
The Federal Reserve and the Bank of England are also expected to keep rates unchanged at their upcoming monetary policy meetings next week. However, if oil prices continue to climb, the possibility of additional rate hikes cannot be ruled out.
According to Reuters, financial markets estimate about a one-third chance that the Fed will raise rates next week, with expectations for two rate hikes by January 2024 already priced in.
* This article has been translated by AI.
Copyright ⓒ Aju Press All rights reserved.