Oil prices jump amid Middle East conflict
Oil prices have spiked higher following the US-Israel attacks on Iran over the weekend and the latter’s retaliatory actions across the region. Brent crude has jumped by around $7 per barrel – or almost 10% – from Friday’s close to just under $80 p/b, its highest level since mid-January 2025. The dollar is the main beneficiary so far in FX, gaining ground against the board including versus the Swiss franc and Japanese yen. EURUSD and GBPUSD are down around a cent and a cent and a half respectively from Friday’s closing levels, trading at about $1.17 and just below $1.3350 this morning. EURGBP is marginally firmer at about £0.8780.
Equity markets in Asia were mostly in the red overnight, with the Nikkei in Japan off almost 1.5%, while European stocks are down around 2.5% this morning. In government bond markets, Japanese 10-year yields are slightly lower, by 3-4bps, but perhaps somewhat surprisingly, equivalent US yields are a touch higher overnight, by 2-3bps (albeit following a sharpy decline of circa 15bps last week), while German and UK yields are marginally higher at the start of play today too.
Ahead of tomorrow’s flash Euro area inflation reading for February, German inflation came in a touch lower than expected last month at 2.0% according to data released on Friday, down from 2.1% in January. French and Spanish inflation were both higher than expected though at 1.1% and 2.5% respectively, up from 0.4% and 2.4% in January. The latest consensus forecast is for Euro area inflation to have remained at 1.7% last month.
Looking ahead, while clearly the focus for markets will be on developments in the Middle East, there are some important economic data due this week. As well as Euro area inflation, US releases include the latest ISM manufacturing and services surveys today and Wednesday respectively as well as retail sales and the key employment (non-farm payrolls) report on Friday. There are also a large number of ECB and Fed members due to speak over the course of the week.