Brent crude nears $100 as Middle East tensions rattle emerging markets

Brent crude surged toward $100 a barrel on Tuesday as escalating hostilities between the United States and Iran rattled energy markets, sending emerging-market assets lower just days ahead of a closely watched US inflation report.

Oil Climbs on Fresh Middle East Escalation

Brent crude rose to around $99 on Tuesday, building on Monday's 1.1% gain that brought the benchmark to a six-week high of $97.31. The latest leg higher came after Iran-backed Houthi rebels attacked Saudi energy sites and Tehran threatened "economic warfare" against the United States. Iran's announcement of a planned "exclusion zone" near the Strait of Hormuz added to supply fears in a market already contending with months of disrupted shipping through the critical waterway.finimize+3

The Strait of Hormuz has been effectively contested since Iran's ceasefire with the US collapsed in early July, with both sides engaging in tit-for-tat attacks on tankers. Goldman Sachs The Goldman Sachs Group, Inc. ↘ 0.36% has warned that Brent could reach $120 a barrel if assaults on Middle Eastern shipping routes broaden and intensify.wsj+1

Emerging Markets Feel the Squeeze

The oil price spike rippled through developing economies on Tuesday. MSCI's ↘ 2.27% emerging-market stock index fell 0.4%, a broad emerging-market currency gauge slipped 0.1% from a record high, and an eastern European currency index dropped 0.3%. Hungary's forint was a standout decliner, falling 1.2% against the euro despite August inflation coming in at just 1.3%, well below the central bank's 3% target.tmgm+1

The forint's weakness illustrates a broader vulnerability: currencies in countries with active easing cycles offer less cushion when global investors shift to safety. Higher oil prices raise inflation risk for energy-importing nations while simultaneously worsening their trade balances.finimize

All Eyes on the Fed

The timing compounds the pressure. Strong US jobs data released Friday prompted UBS ↘ 2.03% Global Wealth Management to forecast two 25-basis-point rate hikes this year, in September and December, reversing its prior call for no policy change. Market-implied odds of a September hike rose to roughly 60%.live.euronext+1

Friday's US inflation report has become a focal point for investors trying to gauge whether the Federal Reserve will tighten further. As UBS's Ulrike Hoffmann-Burchardi noted, the choice between another hike and a pause is "closely balanced" — and a Brent price flirting with triple digits only sharpens the dilemma.finimize