This week, oil rose above $100 as tensions in the Middle East intensified, while the pressure from rising US interest rates increased and the yen strengthened. Concerns about supply remained in focus toward the weekend.
Global markets saw significant moves this week across oil, interest rates, foreign exchange and equities. Oil prices rose amid heightened tensions in the Middle East, and long-term US interest rates also moved higher, but the yen nevertheless strengthened in an unusual turn of events.
Oil rose from the high-$97s at the start of the week to around $109 at one point toward the weekend. The rise in oil prices pushed up costs for gasoline and other products, contributing to stronger inflation concerns and expectations of additional rate hikes.
The US 10-year Treasury yield rose to the 4.99% range after the CPI release. Interest rates were also rising in major economies, including the ECB's 0.25-percentage-point rate hike, and the global rise in rates weighed on equity markets.
In Japan, the yen strengthened as expectations of a Bank of Japan rate hike grew and yen-selling positions were unwound. As the yen strengthened, concerns also spread about a contraction in carry trades.
By the weekend, reports emerged of developments that could rekindle concerns about Middle East supply, leaving open the possibility of renewed moves in oil markets. The policy direction of the Federal Reserve and the Bank of Japan is expected to be the focus next week.