International oil benchmark Brent spiked above US$100 a barrel on Wednesday for the first time since late July, following renewed US-Iran hostilities, stoking fears of price increases and interest rate hikes.

The jump in crude prices – with Brent up more than three percent to US$101.21 a barrel – dragged down stock markets as investors worried that major central banks will raise rates to keep a lid on inflation.

On Wall Street, the Dow closed 0.8 percent down.

Across the Atlantic, Europe's markets fell, with Paris ending the day down nearly two percent.

European natural gas prices rose sharply to their highest level since early 2023, topping 80 euros per megawatt-hour, as nations strive to replenish stocks ahead of winter.

The US$100-a-barrel mark for crude oil "is a psychological level that matters for markets" and raises "costs for businesses and consumers and ultimately could weigh on economic growth," argued Kathleen Brooks, research director at the XTB trading group.

The main US oil contract, West Texas Intermediate, climbed to over US$96 a barrel. Patrick O'Hare, chief market analyst at Briefing.com, blamed "nettlesome retaliatory strikes between the US and Iran doing the damage."

Average diesel prices in the United States reached a record US$5.94 per gallon, heaping domestic pressure on US President Donald Trump ahead of November's midterm elections.

All eyes are on US inflation data due on Friday that could cement expectations that the Federal Reserve will raise borrowing costs next week.

"The bump in oil prices naturally translates to a bump in concerns about inflation and a possible rate hike by the Fed," O'Hare said.

Inflation data that is in line with expectations, or higher than anticipated, would raise expectations of a hike, said Forex.com analyst Fawad Razaqzada.

Before then, the European Central Bank is widely forecast to lift eurozone interest rates on Thursday.

Inflation concerns have been driving yields on government debt higher as investors demand greater returns.

The yield on 10-year US Treasury bond jumped on Wednesday to its highest level since 2023, despite the US Treasury Department announcing an expanded buy-back programme.

This came as officials sought to rein in a rise in borrowing costs, but the buy-back plan disappointed investors.

Markets are also concerned about an escalating trade fight between Washington and Ottawa, with the Trump administration on Tuesday announcing an incoming import ban, including on alcoholic beverages.

Iran on Wednesday launched fresh attacks against US targets in the Middle East in retaliation for American strikes on Iranian oil tankers, dragging the foes deeper into war.

Tehran's powerful Revolutionary Guards said they attacked 20 US vessels trying to pass through the strategic Strait of Hormuz, largely controlled by Iran since the war erupted.

Apart from the war, Apple unveiled its first foldable phone on Wednesday. Its shares closed 0.3 percent down.

The S&P 500 fell 0.5 percent, to 7,636, the Dow fell 0.8 percent, to 52,381, while the Nasdaq fell 0.6 percent, to 26,253. (AFP)



Edited by Robert Kemp