International oil prices have surpassed $106 per barrel as military tensions in the Middle East escalate. Attacks on oil production facilities and key transport routes have heightened concerns over energy supply disruptions. With inflationary pressures from high oil prices persisting, discussions within the U.S. Federal Reserve about the need for further interest rate hikes are intensifying, adding to global financial market anxieties.
According to the International Financial Center, on October 12, Brent crude prices rose by 1.84% to $106.65 per barrel, marking the highest level since September 15.
The increase in oil prices reflects concerns over supply disruptions in the Middle East. The Houthi rebels in Yemen have attacked Saudi Arabia's capital, Riyadh, causing operational issues at some refineries and east-west pipelines. The closure of King Khalid International Airport in Riyadh has also been extended. Additionally, drone attacks targeting oil tankers in the Strait of Hormuz and waters near Oman have further increased uncertainty in oil transportation.
The rise in oil prices could lead to prolonged monetary tightening in major economies. Cleveland Federal Reserve President Loretta Mester noted that given firms' pricing power and robust economic growth, the current interest rate levels may not sufficiently curb inflation. She suggested that a series of small rate increases could be more effective in stabilizing inflation expectations than a single large adjustment.
Market participants are closely monitoring the possibility of further tightening by the Fed. Some traders estimate the probability of a rate hike in October at about 19%. Bank of America has deemed this outlook overly cautious, while Citigroup argues that the likelihood of aggressive rate hikes by the Fed is low, citing a slowdown in inflation and wage growth.
Concerns over tightening and instability in the Middle East have also impacted financial markets. On October 12, the dollar index rose by 0.35% to 102.57, while the euro and yen fell by 0.40% and 0.19%, respectively. The S&P 500 index in the U.S. dropped by 0.06% due to weak semiconductor stocks and hawkish comments from Fed officials.
High oil prices and rising interest rates are also constraining global economic growth potential. The Financial Times reports that while major economies are maintaining solid growth driven by investments in artificial intelligence (AI) and fiscal spending, rising energy prices and increasing government debt are emerging as risk factors. The rise in government bond yields is increasing interest burdens, thereby reducing the capacity for fiscal and monetary policy responses to economic challenges.
The impact of high interest rates is particularly evident in the U.S. housing market. According to real estate data firm Redfin, home sales contracts in the U.S. fell by 4% in September compared to the previous month, marking the largest monthly decline in nearly three years. Analysts attribute this drop primarily to weakened housing demand due to rising mortgage rates.
* This article has been translated by AI.
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