Oil prices surpassed $95 per barrel on Wednesday as tensions intensified in the Middle East, pressuring U.S. equity futures ahead of key Big Tech earnings, while the dollar dipped against other major currencies.
Traders also kept a wary eye on the Japanese yen JPY= that nudged higher after sources told Reuters that the Bank of Japan was on alert to upside inflation risks that could lead to faster interest rate hikes than markets project.
Brent crude prices LCOc1 jumped 4% to hit their highest in six weeks on concerns about supply disruptions after four oil tankers carrying Saudi crude to Asia reversed course in the Red Sea following threats of attack from Yemen's Iran-aligned Houthis, dampening hopes that the end to the recent spike in tensions could be imminent.
"Two weeks ago, oil prices were going down, everybody was saying it was going to go back to $70 or $60 a barrel, and now (Hormuz) is closed again, so oil prices are going up, and everybody is saying it is going to go to $120," said Kevin Thozet, a member of the investment committee at Carmignac.
"Clearly, that's what is driving markets these days more than anything else," Thozet added.
Escalating hostilities could reignite inflation, drive interest rates higher and knock global growth back to as low as 1.3%, down from 2.9% last year, World Bank chief economist Indermit Gill told Reuters.
Also fuelling uncertainty were fresh tariff threats by U.S. President Donald Trump. He said all generic drugs brought into the U.S. will carry a tariff of 0% for two years from August 1, after which the rate will rise to 100% for one year and 200% thereafter. The administration slapped a 50% tariff on some Canadian goods earlier this week.
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