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Oil prices climb on inflation, Iran war
Brent crude rises 2.7% to $98.72 a barrel
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Key Takeaways:
- Oil prices are now hovering between $90 and $100 per barrel as the U.S. war with Iran drags on, contributing to stubborn inflation.
- U.S. inflation rates have remained stubbornly above 3% most of the year, well above the Fed's target rate of 2%.
- Wall Street expects the central bank to raise its benchmark interest rate again at its next meeting in October.
NEW YORK — Some of the pressure that’s ballooned in the bond market is easing on Sept. 30 after a report said inflation across the United States wasn’t as bad last month as economists expected.
The better-than-expected data helped Treasury yields pull back a bit, a day after the 10-year Treasury yield touched its highest level since 2002. That in turn helped U.S. stocks to stabilize.
Oil prices are now hovering between $90 and $100 per barrel as the U.S. war with Iran drags on, contributing to stubborn inflation. That has meant investors are asking more when they buy U.S. debt, pushing down the price for Treasurys while pushing their yields to their highest levels in 24 years.
Brent crude, the international standard, rose 2.7% to $98.72 a barrel. Both cost about $30 more per barrel than they did at this point last year.
The S&P 500 rose 0.3% and is close to finishing September with a small gain instead of a loss. The Dow Jones Industrial Average was up 78 points, or 0.2%, as of 9:35 a.m. Eastern time, and the Nasdaq composite was 0.4% higher.
Easier Treasury yields help the broad stock market because higher yields slow the overall economy by making borrowing more expensive for everyone, while undercutting prices for all kinds of investments.
The yield on the 10-year Treasury fell to 5.24% from 5.26% late Sept. 29. Shorter-term yields, such as for the two-year Treasury, sank even more as traders pulled back on bets that the Federal Reserve will raise its main interest rate next month to get high inflation further under control. They now see less than a coin flip’s chance of that, according to data from CME Group.
The morning’s report said that U.S. consumers had to pay prices that were 3.4% higher overall in August for the cost of living than a year earlier. While that’s still worse than the Fed’s 2% target, it was not as bad as the 3.7% that economists expected.
The report followed others from earlier in the month about inflation during August, but this is the one that the Federal Reserve prefers to use.
To be sure, worries about high inflation are just one of the reasons yields have jumped in the United States and around the world. Another has been signals that the overall U.S. economy continues to chug along despite its many challenges, and a report on Sept. 30 said its growth during the spring was stronger than earlier estimated.
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Other factors sending yields higher are also continuing to churn, including worries about the big debt loads that Washington and other governments worldwide are supporting. The 30-year Treasury yield, which takes into account expectations for inflation and economic growth many years down the line, edged up to 5.60% from 5.59% late Sept. 29.
The bond market also felt upward pressure from another climb for oil prices, which have been swinging on uncertainty about when the war with Iran will allow the flow of crude to be fully restored. Brent crude, the international standard, rose 2.7% to $98.72.
In stock markets abroad, indexes dipped in Europe following a mixed session in Asia. Japan’s Nikkei 225 jumped 1.9%, while France’s CAC 40 fell 0.6% for two of the world’s bigger moves.
AP Business Writers Yuri Kageyama and Michelle Chapman contributed to this report.
