Oil prices surged past $100 a barrel on Thursday, marking their highest point since May, as escalating conflicts in the Middle East intensified concerns over global energy supply disruptions and inflationary pressures. The rise followed attacks by Yemen’s Houthi rebels on two Saudi oil tankers in the Red Sea, escalating the regional conflict beyond the previously affected Strait of Hormuz to include the Bab el-Mandeb Strait, a critical oil transit route at the mouth of the Red Sea.
Brent crude, the global benchmark, gained nearly 7 percent to reach $100 a barrel, erasing the price declines seen earlier in June when a fragile ceasefire between the United States and Iran had eased tensions in the Strait of Hormuz, through which approximately one-fifth of the world’s oil and gas supplies flow. The recent disruptions have raised prospects of prolonged supply constraints, with analysts at Goldman Sachs projecting Brent crude could surpass $120 by the fourth quarter if these critical chokepoints remain affected.
The renewed surge in oil prices has triggered a global sell-off in bond markets and heightened inflation fears across energy-importing countries. In the United Kingdom, yields on ten-year government bonds, or gilts, climbed above 5.1 percent, reaching levels not seen since 2008. The increase raises the cost of government borrowing, placing additional fiscal pressure on Prime Minister Andy Burnham and Chancellor John Healey, who face scrutiny over balancing the budget amid recent spending pledges on energy, transport, and business rates. In response to the rising inflation outlook, markets are now pricing in the likelihood of two further interest rate hikes by the Bank of England this year, with lenders already raising mortgage rates.
Similar trends were observed in other major economies. Germany’s ten-year bond yields hit a 15-year high at 3.23 percent, while U.S. Treasury yields rose to 4.71 percent, their highest since early 2025. The higher borrowing costs accompany declines in global equity markets, with major U.S. indices falling alongside significant drops in technology stocks due to earnings and investment concerns.
Energy prices at the consumer level have also moved sharply upward. In the UK, diesel prices rose by 8 pence per litre and petrol by 5 pence over the last two to three weeks. European gas futures reached €62.54 per megawatt hour, a three-year high. Analysts note that the increased fuel costs are likely to reverse recent reductions in inflation, further squeezing household budgets worldwide.
The Middle East tensions have been driven by the ongoing conflict between Iran and the United States, with the latter resuming military strikes against Iranian tankers around the Strait of Hormuz and issuing threats against Iranian infrastructure following the deaths of U.S. servicemen. The involvement of the Yemen-based Houthis, aligned with Iran and their declared naval blockade against Saudi Arabia, broadens the scope of the conflict and complicates efforts to restore stability.
Market strategists have expressed caution, highlighting that any sustained disruptions to these vital shipping lanes could cause further spikes in energy prices and exacerbate inflation risks globally. Despite hopes for diplomatic de-escalation, current developments suggest heightened uncertainty for economic growth and policy responses in the months ahead.