Middle East Attacks Renew Oil Pressure Ahead of US Inflation Data
Summary
Oil prices rose on Monday following renewed attacks on Saudi Arabia and commercial shipping in the Middle East, raising further concerns over regional supply
Government bond yields climbed sharply last week, with UK 30-year borrowing costs reaching their highest level since January 1998
The euro remained under pressure from French fiscal concerns, while Federal Reserve minutes showed that most policymakers considered another US interest rate increase likely to be appropriate this year
US inflation, UK GDP and final euro area inflation figures are due this week, alongside the IMF's latest global economic outlook
Oil prices moved higher on Monday after a weekend of attacks on Saudi Arabia and commercial shipping in the Middle East renewed concerns about regional energy supplies. Houthi forces struck Riyadh's international airport, while the United Kingdom Maritime Trade Operations agency reported separate attacks on tankers near Oman and in the Strait of Hormuz. Brent crude futures rose in early trading, extending a period of volatility that has kept energy costs and their impact on inflation firmly in focus.
The pressure has extended into global bond markets, where investors have been responding to higher energy prices, persistent inflation and government borrowing concerns. UK 30-year government bond yields reached 6.036% on Wednesday, their highest level since January 1998, while US Treasury yields also climbed sharply. Bond markets steadied towards the end of the week as oil prices temporarily eased, although borrowing costs remained elevated across major economies.
The euro was particularly affected by the recent bond sell-off, falling to a 17-month low against the US dollar last Monday. France's record public debt and the political difficulties surrounding proposed budget reductions continued to weigh on the single currency. By Friday, the euro was heading towards a fifth consecutive weekly decline against the dollar, while the US dollar index was on course for its fourth successive weekly gain. French government bond markets showed some signs of stabilisation during the week, but fiscal concerns remained a significant influence on currency movements.
Attention in the United States now turns to Wednesday's September inflation report following the release of the Federal Reserve's latest meeting minutes. Published last week, the minutes confirmed that policymakers unanimously supported September's quarter-point interest rate increase, which brought the target range to 3.75%–4.00%. Most participants considered another increase likely to be appropriate before the end of the year, although future decisions remain dependent on incoming economic data. Market expectations of an October increase remained relatively low on Friday, making this week's consumer price figures an important update ahead of the Fed's 27–28 October meeting.
European inflation provides another important part of the picture. Eurostat's preliminary estimate showed annual inflation rising to 3.8% in September from 3.2% in August, with energy prices increasing 18.8% year-on-year. The final figures are scheduled for release on Friday. Sterling, meanwhile, performed more strongly against the euro last week despite continued pressure from elevated UK borrowing costs. The pound was heading towards a second consecutive weekly gain against the single currency on Friday, while remaining little changed against the dollar over the week. Thursday's UK GDP release will provide a further update on domestic economic activity ahead of the government's Budget on 28 October.
The International Monetary Fund's annual meetings in Bangkok add another dimension to the week, with rising sovereign debt, energy disruption and global growth among the issues under discussion. The IMF is scheduled to publish its October World Economic Outlook on Tuesday, providing updated economic assessments as governments and central banks continue to navigate higher borrowing costs and inflationary pressures.
Events to Watch This Week:
Tuesday 13 October: IMF World Economic Outlook, October 2026
Wednesday 14 October: US Consumer Price Index for September
Thursday 15 October: UK monthly GDP for August; US Producer Price Index for September
Friday 16 October: Final euro area inflation figures for September
The week brings important inflation and growth updates following a period of sharp movements in energy prices, government bond yields and major currencies. The US and European inflation releases will provide further evidence on price pressures, while UK growth figures and the IMF's updated assessments will add context to the broader economic outlook.
Speak to the Orbis dealing team ahead of this week's key releases to discuss your upcoming currency requirements.
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