Finance09 September, 20262 min read
Oil Surges Above $100 As ECB Hikes Rates, Stocks Slide Across Asia And Europe
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Oil breaches $100 per barrel, fueling inflation fears and weighing stocks in Asia and Europe. ECB lifts policy rate to 2.5%, its second hike of the year to curb inflation.
Oil shock hits markets
Markets slid as oil prices surged back above $100 a barrel, with Brent breaking the psychological level and dampening stock prices across Asia and Europe. France 24 reported that Brent hit a high of $101.94 Thursday while West Texas Intermediate peaked at $97.79, the highest since May.
In Europe, Newsquawk said stocks and fixed income slumped as oil prices surged, with the latest focus shifting towards the Bab al-Mandeb Strait. Newsquawk added that ECB hiked rates by 25bps as expected in a unanimous decision and raised 2027 and 2028 inflation forecasts, while energy-driven weakness pushed European bourses to end the session in the red.
Rates, inflation, and voices
The oil rally fed inflation and rate-hike fears, with France 24 noting that investors were holding their breath for the Federal Reserve and other central banks to raise interest rates to tamp down expected inflation. Saxo Markets’ Neil Wilson told France 24, "September is often tough, historically the weakest for Wall Street," as investors shifted focus to central banks and inflation.
In London, This is Money said the FTSE 100 fell 1.3 per cent, or 141.6 points, to 10,670.06, after Brent crude rose as high as $101.58 a barrel. UBS’s Kiran Ganesh said, "Higher oil prices mean higher inflation expectations, which also means higher chances of interest rate hikes and higher bond yields," framing oil as the key driver compounding pressure on equities.
What’s at stake next
The next market moves hinge on central-bank guidance and incoming inflation data, with France 24 saying the rally stoked expectations that inflation will spike again as Washington prepares to release crucial consumer price data. Newsquawk reported that USTs peaked at 107-05+ and then fell to a trough of 106-16, while the US 10yr yield topped 4.91% as US PPI failed to steady Treasuries after the headline Y/Y 5.4% came in hotter than expected.
In the euro area, Newsquawk said the Governing Council hiked the deposit rate to 2.50% and stated that inflation will remain well above target for an extended period, while revising 2027 and 2028 HICP higher. With oil remaining the main market driver, Al Jazeera Net said Brent futures were at $100.50 per barrel by 06:19 GMT and that the Strait of Hormuz fears were weighing on markets as US Treasury yields rose and gold climbed.