Crude pushes towards $100 on Mideast flare-up, fanning inflation fears

Oil prices jumped more than one percent towards $100 a barrel on Wednesday and stocks fell as a fresh Middle East flare-up stoked supply fears, adding to inflation pressure ahead of key US data this week.

Iran struck a US base in Jordan, deepening the seventh-month conflict with Washington.

Why are oil prices rising towards $100?

Renewed fighting across the Middle East, including Iran's strike on a US base in Jordan and Houthi attacks on Saudi oil facilities, has raised fears of a supply disruption. Brent crude climbed as high as $99.67 a barrel on Wednesday, its highest since July, while West Texas Intermediate headed towards $95.

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 raise interest rates to cap surging consumer prices.

How is the Iran-US conflict affecting the Strait of Hormuz?

The two foes are locked in a stalemate six months into the war, with Tehran maintaining a stranglehold on the Strait of Hormuz, a vital shipping route for the world's oil and gas. Washington is pushing a campaign to choke the Islamic republic's ports and economy in response. Iran said on Wednesday it had struck a US military base in Jordan following American attacks on its vessels in the strait, itself a retaliation for ballistic missile launches at a US warship.

Iran 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.

Why are Houthi attacks pushing up oil prices?

That came after Iran-backed Houthi rebels in Yemen and Saudi Arabia exchanged strikes, with the rebels targeting oil facilities in an offensive towards the Red Sea's Bab al-Mandab chokepoint. The waterway is becoming an increasingly important route for Saudi oil with the Strait of Hormuz shut. Both main crude contracts jumped more than one percent on Wednesday, with Brent hitting as high as $99.67, a whisker away from the $100 last touched in July.

West Texas Intermediate was heading towards $95 for the first time since June.

How are rising oil prices affecting inflation and interest rates?

The surge in energy costs has kept inflation elevated globally and is putting pressure on central banks to raise borrowing costs, with the European Central Bank tipped to do so on Thursday. All focus is on the release of the US consumer price index on Friday, seen as key to whether the Federal Reserve lifts rates next week.

"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."

How are stock markets reacting to the oil price surge?

The prospect of higher borrowing costs weighed on equities, with all three main indexes dropping on Wall Street. Asian markets fluctuated, though tech firms continued to recover from July's rout as the AI boom returned to the fore. Seoul led the gainers as chipmaker SK hynix rallied more than three percent and Samsung climbed more than one percent.

Tokyo, Shanghai, Taipei and Manila also advanced, though Hong Kong, Sydney, Singapore, Wellington and Jakarta edged down. The yen strengthened to around 153.50 per dollar after Tuesday's rally, which had taken it within a whisker of its 2026 high, pared towards the end of the day.