Oil retreat and US inflation data fuel stock rebound ahead of expected Fed hike
US stocks rebounded sharply on Friday after crude oil pulled back below €86.20 ($100) a barrel on news that Iran and Oman will meet Gulf states to discuss reopening the Strait of Hormuz, per RTTNews. Meanwhile, US consumer inflation held at 3.4% in August, solidifying expectations that the Federal Reserve will raise rates next week, according to AFP. For Europe, the relief is tempered by the ECB's own rate hike and continued high energy costs, but the bloc's reduced energy intensity has softened the impact, argues OilPrice.com.
Bottom line — The Fed is 90% likely to hike rates next week, per eToro, while Brent crude fell 2.7% to €90.30 ($104.72) per barrel.
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- US CPI rose 0.4% month-on-month in August; core CPI climbed 0.3%, slightly above the expected 0.2%, according to the Labor Department data reported by multiple outlets.
- The Dow Jones gained 1% to 52,573.29, the S&P 500 rose 0.9% to 7,656.98, and the Nasdaq added 1% to 26,333.04, per RTTNews.
- Crude oil fell nearly 3% after the Financial Times reported Iran and Oman will hold talks with Gulf states on reopening the Strait of Hormuz.
- The International Energy Agency downwardly revised its global oil demand forecast for the year, contributing to the price decline, per the same report.
- US diesel prices surged above €5.17 ($6) per gallon for the first time, a record high, said AFP.
- European stocks closed higher: the DAX and CAC 40 both rose 0.8%, the FTSE 100 added 0.4%, according to AFP.
- The ECB raised borrowing costs this week, citing the energy cost impact from the Middle East conflict, per AFP.
- OilPrice.com argues Europe's long-term energy efficiency investments have made it more resilient: the EU uses 44% less energy per euro of output than in 1995, and wind and solar surpassed fossil fuels for electricity generation for the first time.
- However, the analysis notes part of the efficiency gain comes from the closure of energy-intensive industries: German energy-intensive production fell 15.2% between February 2022 and March 2026.
- The EU now relies heavily on US LNG: the US supplies roughly two-thirds of Europe's LNG, with €690 billion ($750 billion) committed through 2028, per OilPrice.com.