Berliner Boersenzeitung - Brent breaks $100 on Mideast flare-up, fanning inflation fears

With the US-Iran conflict now in its seventh month and showing no sign of calming despite White House claims of an imminent deal, investors are growing increasingly anxious that the Federal Reserve will have to hike interest rates to cap surging consumer prices.

The two foes are locked in a stalemate, with Tehran maintaining a stranglehold on the Strait of Hormuz, a vital shipping route for the world's oil and gas, and Washington pushing a campaign to choke the Islamic republic's ports and economy.

Iran said Wednesday it had struck a US military base in Jordan following American attacks on its vessels in the strait, which itself was in retaliation for ballistic missile launches at a US warship.

Tehran also said it would target oil tankers off Kuwait and Bahrain and urged crews to leave their ships, according to the IRNA state news agency.

That came after Saudi Arabia and Iran-backed Houthis in Yemen exchanged strikes, with the rebels targeting oil facilities in an offensive towards the Red Sea's Bab al-Mandab chokepoint.

The waterway is an increasingly important route for Saudi oil with the Strait of Hormuz shut.

Both main crude contracts jumped more than one percent, with Brent hitting as high as $100.19, the highest since July. West Texas Intermediate was heading towards $95 for the first time since June.

The surge in energy costs has kept inflation elevated globally and is putting pressure on central banks to hike borrowing costs, with the European Central Bank tipped to do so Thursday.

All focus is on the release of the US consumer price index Friday, which is seen as the key to whether the Fed lifts rates next week or not.

"The continuing conflict in the Middle East is keeping concerns over supply disruptions, and that in turn is worrying investors about the inflationary consequences of elevated oil prices," said Fawad Razaqzada, a market analyst at FOREX.com.

"For the Fed, the combination of resilient US employment and renewed pressure from energy prices are both hawkish signals.

"A sustained rise in oil prices would risk reversing the progress on inflation that policymakers have been relying on to justify lower interest rates, while simultaneously squeezing consumers and businesses."

The prospect of borrowing costs heading up is weighing on equities, with all three main indexes dropping on Wall Street.

Asian markets fluctuated, though tech firms continued to enjoy a recovery from July's rout as the AI boom returns to the fore.

Seoul led the gainers as chipmaker SK hynix rallied more than three percent.

Shanghai, Wellington, Taipei, Bangkok and Manila also advanced, though Hong Kong, Tokyo, Sydney, Singapore, Mumbai and Jakarta were down.

London, Frankfurt and Paris fell at the open.

On currency markets, the yen strengthened to around 152.95 per dollar after seeing Tuesday's rally -- which saw it within a whisker of its 2026 high -- pared towards the end of the day.

- Key figures at around 0810 GMT -

West Texas Intermediate: UP 1.7 percent at $94.64 per barrel

Brent North Sea Crude: UP 2.2 percent at $100.06 per barrel

Tokyo - Nikkei 225: DOWN 0.2 percent at 65,142.78 (close)

Hong Kong - Hang Seng Index: DOWN 0.2 percent at 25,274.96 (close)

Shanghai - Composite: UP 0.3 percent at 3,951.51 (close)

London - FTSE 100: DOWN 0.1 percent at 10,801.18

Dollar/yen: DOWN at 153.22 yen from 153.96 yen on Tuesday

Euro/dollar: UP at $1.1640 from $1.1627

Pound/dollar: UP at $1.3560 from $1.3541

Euro/pound: DOWN at 85.84 pence from 85.85 pence

New York - Dow: DOWN 1.2 percent at 52,786.07 (close)

(A.Lehmann--BBZ)