Oil Surge and Hawkish Fed Remarks Pressure Global Markets

Global markets came under pressure as renewed US-Iran military strikes near the Strait of Hormuz sent oil prices sharply higher and revived concerns over inflation and monetary policy.

US equities fell for a second consecutive session on Monday, with the Dow Jones declining 0.70%, the S&P 500 falling 0.33% and the Nasdaq slipping 0.12%.

The renewed geopolitical escalation overshadowed a weekend announcement by US President Donald Trump of a deal granting Washington control of 65 billion barrels of Venezuelan oil reserves, aimed at eventually lowering fuel prices.

Hawkish Fed

Markets instead focused on the immediate threat to energy supplies following US strikes on Iranian rocket launchers near the Strait of Hormuz and Tehran’s retaliation. Higher crude prices have raised concerns that renewed energy inflation could complicate the Federal Reserve’s policy outlook.

Fed Chair Kevin Warsh’s hawkish comments at Jackson Hole added to the pressure. He described 3.7% inflation as “concerning” and indicated that he would be reluctant to describe current monetary conditions as sufficiently restrictive.

European equities also weakened, with the STOXX Europe 600 declining 0.62%, while Asian markets were mixed. Japan and Hong Kong edged lower, whereas South Korea and China advanced.

Investors now turn to a heavy US economic data calendar, particularly Friday’s non-farm payrolls report, which could influence expectations for the Federal Reserve’s next policy move.

Unless tensions in the Middle East escalate further, markets may stabilise, although elevated oil prices and inflation concerns are likely to keep volatility high.

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