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Oil Spikes as US, Japan Eye Rate Hikes
14 Sep
Summary
- Oil prices surged due to supply concerns from attacks.
- Markets anticipate US Federal Reserve rate hikes this week.
- Bank of Japan may also increase rates to support the yen.
Asian share markets experienced a downturn on Monday as oil prices surged due to renewed supply concerns. Attacks on Saudi Arabia and ships in the Gulf, following an earlier pipeline incident, heightened anxieties about global energy supplies. Analysts warn that sustained disruptions could prolong elevated oil prices and fuel global inflation.
Investor sentiment was further impacted by expectations of impending interest rate hikes. Markets are pricing in an 86% chance the U.S. Federal Reserve will raise rates this week, with further hikes possible by December. Similarly, there is a strong likelihood the Bank of Japan will increase its cash rate, aiming to stabilize the yen after recent market interventions.
These monetary policy shifts could test equity valuations, although some strategists believe strong corporate earnings may offer support. Historically, while markets may see initial dips after the first rate hike, the overall bull market has continued in the following months. Gold prices also slipped as higher bond yields reduced its appeal.
