Oil Breaches $100 on Iran Strikes, Fueling Rate-Hike Fears; Futures Slip, Yields Surge

Oil prices extended their rally, pushing Brent crude above $100 a barrel for the first time since July 24, as Middle East tensions intensified and supply risks mounted. The surge exacerbated inflation fears, sending U.S. equity futures lower and lifting Treasury yields across the curve.

S&P 500 futures fell 0.3% to 0.5% in Tuesday morning trading, erasing early gains, while Nasdaq futures slipped 0.6%. The moves followed a holiday-shortened U.S. session and came as traders returned to a week packed with central bank decisions, inflation data, and corporate earnings.

Brent crude traded around $99 to $100.04 a barrel, with WTI surging above $95, after the U.S. struck Iranian tankers near the Kharg Island export hub and in the Gulf of Oman. Tehran responded by firing missiles at Jordan and warning ships in the Persian Gulf, according to Zero Hedge. Separately, Saudi Arabia said operations at facilities in the kingdom’s south were halted by attacks, while Iran said discussions with Oman regarding the Strait of Hormuz are in the final stages, with a temporary shipping route accord likely in the coming days, NDTV Profit reported, citing Bloomberg.

Shanghai crude traded above $102, reflecting strong Chinese purchases that added to tightness in oil markets, Zero Hedge reported.

**Rate Hike Bets Firm**

The oil-driven inflation narrative reinforced expectations that central banks will need to raise rates. Money markets price a 60% chance that the Federal Reserve will hike by a quarter point at its Sept. 15-16 meeting, according to the CME Group’s FedWatch tool, as reported by The Economic Times. The Fed is in a communications blackout from Sept. 5-17, leaving Friday’s consumer price index as the key swing factor.

September rate hikes by the European Central Bank and Bank of Japan are largely priced in, Zero Hedge noted. The ECB is expected to raise its deposit rate by a quarter point to 2.50% on Thursday.

“We are likely to be in some sort of period of digestion, because we are going through a pretty meaningful adjustment in terms of central bank policy around the world,” Anastasia Amoroso at Partners Group told Bloomberg TV, as quoted by Zero Hedge.

**Treasuries Fall, Yen Strengthens**

Treasuries sold off, with the 10-year yield climbing above 4.81%, up 3 basis points, and the two-year yield hitting 4.42%, its highest since 2024. The shorter end bore the brunt of the selloff. Europe saw a steeper decline in bonds.

The dollar weakened, trading near a seven-month low. The yen surged to its strongest level since February, touching 153.51 per dollar, as expectations of more restrictive Bank of Japan policy supported the currency. Hedge funds are betting the yen will strengthen beyond 150 by year-end, according to Zero Hedge. Treasury Secretary Scott Bessent challenged traders to test his resolve on boosting the Japanese currency, saying “I am the house now,” Zero Hedge reported.

**Asian Markets Mixed; Tech Stocks Rally in Seoul**

Asian markets were mixed on Tuesday. Japan’s Nikkei 225 edged up 0.2%, while South Korea’s Kospi surged more than 4.6% on sustained buying of computer chipmakers, SFGate reported. China’s Shanghai Composite rose as exports jumped 25% year-on-year in August, according to SFGate. Hong Kong’s Hang Seng fell 1% as Chinese tech stocks retreated.

**Corporate Moves and Earnings**

In premarket trading, megacap tech stocks were mixed. Meta Platforms rose 5% after debuting Muse, an AI assistant, with the company saying early usage “blown way past our projections” and user engagement 10 times higher than test cohorts, according to Zero Hedge. Other megacaps were lower: Amazon fell 0.4% to 1.6%, Apple slipped 0.2%, Alphabet dropped 0.7% to 1.8%, and Tesla declined 0.2% to 0.9%.

Novartis shares fell after its experimental heart drug, pelacarsen, failed in a final-stage study, a blow that also weighed on Ionis Pharmaceuticals and Amgen, Zero Hedge reported. It was the third drug setback in a week for the Swiss drugmaker.

Uber Technologies is said to be raising €4 billion ($4.7 billion) in its debut euro bond, while Amazon sold its debut sterling bonds in a four-part deal. BP’s North Sea operations have drawn interest from suitors as the oil major works to exit the basin.

Brookfield landed a $1 billion commitment from the UK’s Nuclear Liabilities Fund, and Volkswagen is considering offloading Ducati as part of a portfolio overhaul, according to Zero Hedge.

**Data and Conference Season Ahead**

This week’s economic calendar includes the U.S. CPI on Friday, producer price index on Thursday, and weekly jobless claims. The Fed’s blackout period began Sept. 5. Corporate conference season is underway, with Goldman Sachs’ Communacopia & Technology Conference and Jefferies events on both coasts.

Oracle and Adobe report earnings on Thursday, offering a fresh read on AI infrastructure demand, according to Zero Hedge.

“The risks to equity markets continue to pile up as the discount rate which they face gets higher and higher and higher,” said Ashley Lester, chief research officer at MSCI, as reported by Zero Hedge.