Geopolitics Takes Center Stage: Crude Oil Touches $100 as Global Equity Markets Sell Off
Geopolitics is the big story today in markets, with little on the micro single-stock stories and the world waiting toward the end of the week for the macro narrative to play out with the top-down macroeconomic data coming out of the US.
With Brent crude—the world's benchmark oil price—back touching one hundred dollars a barrel and WTI oil (West Texas Intermediate, the US oil price) at ninety-four at the time of writing, continued geopolitics in Iran has raised the price of the world's number one energy source. The price at the pump for petrol/gas and diesel is set to follow, which will drive up the price of fuel from everyday people to global companies, costing them more for logistics. The price of goods will most likely be set to follow; for example, the transportation of food to stores under higher oil prices will inflate the price of food not only through logistics, but even at the agricultural level. Market Reaction and Risk-Off Sentiment
The London and European markets this morning have seen a risk-off sentiment in stock markets, with a sell-off throughout Europe and the US (United States of America)—from the UK's FTSE 100 to the German DAX, France's CAC 40, and the S&P 500 and NASDAQ futures all in the red and seeing pressure today. Central Bank Dilemma: Fed, ECB, and BOE
If oil persists to stay at $100 or even higher by the next Fed meeting, will it make things much more of a chance for Fed Chair Kevin Warsh to hike—with borrowing costs on the dollar at the next Fed decision—taking a hawkish stance with an attitude of higher interest rates as a cycle rather than a one-off rate hike?
The ECB (European Central Bank) also makes its decision on borrowing costs on the euro this week. With oil prices so high, it leaves things difficult for Christine Lagarde, and then the same tone could follow on from the BOE (Bank of England) on decisions with the pound GBP .