Oil prices clawed back above the $100 mark on Thursday, recovering from an early dip in Asian trading, as investors weighed a partial restoration of Gulf crude flows against the absence of a diplomatic breakthrough between Washington and Tehran. By mid-morning in Europe, Brent crude, the international benchmark, was up 2.6% at just over $100 a barrel, while the US West Texas Intermediate contract gained a similar amount to trade near $92.80.
The rebound came after a volatile session in which crude exports from the Gulf returned to near pre-conflict levels. Saudi Arabia has partly reopened its East-West pipeline, which bypasses the strategic Strait of Hormuz, easing some supply concerns. Yet the threat of disruption remains: British maritime authorities reported that three vessels were struck in the strait on Tuesday, underscoring the persistent risks to shipping lanes.
Diplomatic standoff continues
Iran said on Wednesday it had received a US response to its offer to reopen the strait, conditional on Washington lifting its blockade of Iranian ports, releasing frozen assets, and easing current oil sanctions. Iranian President Masoud Pezeshkian struck a conciliatory tone, stating, "We will make every effort to bring the agreement to fruition."
US President Donald Trump, however, was less diplomatic. "We blow them up or make a deal," he told reporters in the Oval Office late on Wednesday, adding that the war would end "very soon" one way or another. The contrasting statements highlight the fragility of any potential accord.
Meanwhile, OPEC+ is expected to keep its November output targets unchanged when it meets on Sunday, according to delegates cited by Bloomberg. That decision, if confirmed, would do little to cool the market, especially as European nations grapple with the knock-on effects of high energy prices.
European markets slide on inflation fears
European equities opened lower on Thursday, with the Euro Stoxx 50 down about 1% and the broader Stoxx 600 falling 1.5%. The UK's FTSE 100, France's CAC 40, Germany's DAX, Italy's FTSE MIB, Spain's IBEX 35, and the Netherlands' AEX all traded between 1% and 2% lower.
The sell-off was driven by faster-than-expected September inflation figures from Germany, France, and Italy, largely attributed to the energy shock. With gas reserves running thin and prices high, the bloc faces a challenging winter. Several governments, including Italy, have extended fuel tax cuts to cushion consumers, but the pressure on household budgets remains intense.
In Asia, markets were mixed. Japan's Nikkei 225 jumped nearly 2% as chipmakers rallied after US memory maker Micron forecast stronger-than-expected results. South Korea's Kospi rose over 2% after September exports surged 83.5% year-on-year to a monthly record, driven by chip sales. Markets in mainland China and Hong Kong were closed for National Day holidays.
US bonds under pressure
On Wall Street, the S&P 500 fell 0.3% on Wednesday, the Dow Jones Industrial Average lost 0.9%, and the Nasdaq composite edged up 0.2%, as the S&P 500 ended September with a monthly loss. Softer-than-expected US inflation data initially trimmed the odds of an October rate hike to around 38% from about 50%, according to CME's FedWatch tool, but stronger growth figures later weighed on stocks.
The 10-year US Treasury yield touched 5.3%, its highest since 2007, capping its biggest quarterly rise since 1994. That surge in yields reflects growing expectations that the Federal Reserve will keep interest rates higher for longer, a trend that has global implications. For Europe, where fuel supply remains vulnerable to US policy shifts, the combination of high oil prices and tightening financial conditions poses a significant headwind.
As the continent watches these developments, the patchwork of national responses to record fuel prices may prove insufficient if the crisis deepens. With the winter months approaching, European policymakers face the dual challenge of containing inflation while ensuring energy security.
