Brent Crude Edges Closer to USD 100 Per Barrel Amid Escalating Middle East Tensions

In Focus Today

• Today brings a quiet economic calendar with no major tier-one data releases scheduled. Market attention is expected to center on evolving geopolitical developments, especially in the Middle East.
• The National Bank of Poland is set to announce its interest rate decision today, with markets broadly expecting the policy rate to hold steady at 3.75%.

Economic and Market News

Overnight Developments

In China, August inflation figures largely met expectations, though producer prices delivered a positive surprise. The Producer Price Index (PPI) climbed 3.8% year-over-year, up from 3.5% in July, driven primarily by rising energy, crude oil, and non-ferrous metal costs amid supply concerns tied to the ongoing Middle East conflict. Consumer prices rose 0.8% annually, matching forecasts and supported by firmer energy and vegetable prices, even as food prices continued to decline. Core inflation edged up to 1.0% from 0.9%, underscoring persistent softness in domestic demand and modest underlying inflationary pressures.

In commodities, Brent crude oil is approaching the key $100-per-barrel mark, trading near $99 this morning and building on gains from the previous session. Supply concerns have intensified following reports that U.S. forces destroyed five Iranian tankers, prompting retaliatory strikes by Iran on a U.S.-used base in Jordan and naval vessels near the Strait of Hormuz. Additionally, Houthi attacks on Saudi energy infrastructure yesterday have heightened fears of disruptions to global oil supplies.

In U.S.-Canada trade relations, tensions escalated as Washington imposed import restrictions on Canadian alcohol, motorcycles, and dairy products effective September 29. This follows Canada’s reciprocal tariffs on U.S. goods, which came into effect earlier this week in response to American duties of 50% on approximately $20 billion worth of Canadian imports. The U.S. has maintained its threat to impose 50% tariffs on Canadian vehicles and auto parts starting January 1.

Yesterday’s Highlights

In the U.S., the NFIB’s small business confidence index slipped 1.1 points to 98.7 in August, remaining above historical averages. Hiring intentions and the proportion of firms struggling to fill job openings softened marginally but still reflect tight labor market conditions not seen in recent months. Employment changes over the past three months stayed subdued, despite strong payroll numbers reported in August’s Non-Farm Payrolls report. Labor quality was again cited as the top challenge for businesses. Overall, forward-looking labor indicators suggest resilience, even as hiring expectations show signs of cooling due to skills shortages—consistent with our view that the Federal Reserve will adopt a Hawkish Hold stance at next week’s policy meeting.

In Denmark, electricity prices have seen significant increases throughout the month. In response, we’ve adjusted our outlook for August CPI, now projecting inflation to rise to 2.2% compared to 1.7% in July. These figures are scheduled for release Thursday morning.

Equities: Global equity markets closed lower yesterday, with the S&P 500 declining 0.6%, while the STOXX Europe 600 ended largely flat. Technology stocks outperformed, driven by semiconductor shares as U.S. investors returned from the Labor Day weekend and continued assessing the implications of the Astra model release. Energy stocks also performed strongly amid climbing oil prices nearing $100 per barrel.

Across the Atlantic, healthcare emerged as a notable underperformer. Though company-specific news weighed on sentiment, the sector’s slump may also stem from its robust performance over the summer months. Despite aligning with our slightly more cautious approach to equities, the divergence between healthcare and other defensive sectors has grown unusually wide. Consequently, we maintain a preference for expressing our defensive positioning through alternatives like consumer staples and real estate.

Fixed Income & Foreign Exchange: Oil prices advanced overnight amid ongoing hostilities in the Middle East, including reports of explosions on Kharg Island. The front-month Brent futures contract now trades just below the $100 threshold. Meanwhile, U.S. short-term yields edged higher, lifting the 2-year Treasury yield to 4.40%. With limited economic data on tap, all eyes turn to today’s U.S. Treasury announcement regarding the scale of tomorrow’s buyback program. Treasury Secretary Bessent recently claimed he makes market decisions with “pretty good insight,” implying access to privileged information and effectively challenging investors to take a contrarian stance. His remarks further strengthened the Japanese yen, pushing USD/JPY from 154.40 to around 153.40 overnight. In Nordic currencies, EUR/SEK has traded within a tight range around 11.15 in recent sessions, while EUR/NOK continues its downward drift, supported by firmer energy prices.

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