Oil hits one-month high as Mideast war keeps investors on edge

Brent crude hit its highest price since June 11 on Monday, climbing above $91 a barrel as fighting between the United States and Iran intensified.

Asian equities traded mixed as investors weighed the risk of a prolonged Middle East war. The moves extended a rally that began building last week.

Why did oil prices jump to a one-month high?

Oil rose after another weekend of escalating strikes, with the US hitting Iranian targets and Tehran retaliating against military assets in the Gulf. Investors are pricing in a heightened risk of disruption to the Strait of Hormuz, the corridor that carries about a fifth of the world's seaborne oil. Both Brent and West Texas Intermediate extended gains after climbing more than four percent at the end of last week.

The conflicting signals from the region have left investors struggling to gauge where markets go next. Higher crude prices have revived concerns that inflation could stay elevated, complicating the path to lower interest rates. Some analysts, however, argue the broader economic backdrop remains more supportive than the headlines suggest.

Could the oil price surge reignite inflation fears?

"Markets are once again being forced to trade two seemingly contradictory stories on the same screen," said Stephen Innes of SPI Asset Management. He said the renewed rise in oil prices has added a fresh geopolitical risk premium to markets. Still, he pointed to cooling underlying US inflation and a softer labor market as reasons the energy shock is unlikely to trigger a new cycle of broad-based inflation.

Innes said the bigger danger lies elsewhere. If elevated oil prices persist long enough, they could erode household spending and weigh on economic growth more broadly. That risk, rather than a fresh inflation spike, is what analysts are watching most closely.

How are Asian and global markets reacting?

Chinese shares outperformed the region, extending a recent rally on expectations that Beijing will unveil further stimulus after last week's economic data. Hong Kong added more than two percent while Shanghai rose 1.32 percent. Taipei, Manila and Singapore also edged higher.

Elsewhere, caution prevailed. Seoul, Sydney and Wellington opened lower, following a weak session on Wall Street. All three major US indexes finished down on Friday as investors rotated out of technology shares and kept a close watch on developments in the Gulf.

Gold eased 0.40 percent despite the geopolitical uncertainty, while silver advanced 1.00 percent.