Oil Holds Above $100 as Asian Stocks Slide Ahead of US Inflation Data

Oil prices held above $100 a barrel on Thursday while Asian equities declined as investors assessed rising inflation risks and prepared for key US economic data that could influence the Federal Reserve’s next interest-rate decision.

Brent crude futures were around $101.40 a barrel in early trading after breaking above the psychologically important $100 level on Wednesday for the first time since July. The move reflects growing concerns that the widening Middle East conflict could disrupt energy supplies and keep inflation pressures elevated for longer.

Asian Stocks Retreat as Oil Prices Rise

Higher energy prices weighed on investor sentiment across Asia. MSCI’s broadest index of Asia-Pacific shares outside Japan fell around 1%, while Japan’s Nikkei and South Korea’s KOSPI both declined by more than 1%.

The market weakness came as investors assessed the impact of rising crude prices on inflation, corporate costs and future monetary policy. Higher oil prices can increase transportation and production expenses, while also putting pressure on consumer prices.

The latest oil surge is closely linked to the escalation of conflict in the Middle East. Fighting between Saudi Arabia and the Houthis in Yemen has intensified, adding another source of risk to regional energy supplies. At the same time, attacks on shipping have increased concerns about the security of important trade and energy routes.

US Treasury Yields Remain Elevated

The rise in oil prices has also put pressure on global bond markets.

The benchmark 10-year US Treasury yield was around 4.84% on Thursday after reaching its highest level since 2023 during the previous session. Investors have become increasingly concerned that higher energy and commodity prices could keep inflation above central-bank targets for longer.

The US Treasury’s announcement of a $6 billion buyback of longer-dated debt failed to provide much relief to the bond market, with some investors expecting a larger programme.

For investors, the combination of higher oil prices and elevated bond yields creates a difficult environment for equities because both factors can increase borrowing costs and reduce expectations for future monetary easing.

US Inflation Data Takes Centre Stage

The next major focus for financial markets is US inflation data.

The Producer Price Index (PPI) is due on Thursday, followed by the Consumer Price Index (CPI) on Friday. Both reports could influence expectations for the Federal Reserve’s September 15–16 policy meeting.

Fed funds futures were pricing in roughly a 60% probability of a rate increase next week, according to the Reuters report. That expectation has increased the importance of the upcoming inflation figures. A stronger-than-expected reading could reinforce concerns that the Fed may need to keep monetary policy tighter for longer.

There are also concerns that rising agricultural commodity prices could add further pressure to food inflation. Analysts expect the combination of energy and food costs to keep headline inflation elevated into early 2027.

ECB and BOJ Also in Focus

The European Central Bank is also in focus as markets prepare for its latest policy decision. The euro was little changed around $1.1632 ahead of the meeting, with investors watching policymakers’ comments for clues about the future direction of interest rates.

Attention is also turning towards the Bank of Japan, where markets increasingly expect another rate increase. The Japanese yen has strengthened sharply in September, rising about 4% against the US dollar as expectations for faster BOJ tightening increased.

Global Markets Face a Difficult September

The combination of oil above $100, elevated Treasury yields, geopolitical uncertainty and upcoming inflation data is creating a challenging backdrop for global markets.

If crude prices remain elevated, investors may need to reassess expectations for inflation and interest-rate cuts across major economies. Higher yields could continue to pressure growth-sensitive equities, while commodities and safe-haven assets may attract additional interest.

For now, markets are watching three key developments: the direction of oil prices, Thursday’s US PPI and Friday’s US CPI. Together, they could determine whether the recent rise in inflation expectations becomes a temporary shock or develops into a longer-lasting threat to global monetary policy and financial markets.