Oil Rises as Mideast Conflict Resurgence Boosts Supply-Disruption Concerns — Update

By Ronnie Harui

Oil prices rose Monday as a resurgence in Middle East hostilities boosted concerns over supply disruptions in the region.

U.S. forces attacked two Iranian rocket launchers in the Strait of Hormuz on Sunday, the U.S. Central Command said, marking the first American strike in weeks. U.S. Central Command said that the Iranian launchers, which were deployed on Larak Island, were preparing to fire rockets filled with sea mines into the strait when they were struck.

Shortly after the U.S. strike, American forces defended against missiles launched at Jordan, according to U.S. military officials. Jordan hosts almost 4,000 U.S. troops and is an important staging ground for U.S. military operations throughout the Middle East.

"The action escalates regional tension and heightens the risk of renewed full-scale conflict in an area already heavily impacted by war," InTouch Capital Markets' analysts team said. "Risk-off sentiment swept Asian markets to end August" as investors digested rising Middle Eastern tensions and "hawkish" monetary-policy guidance from the Federal Reserve, the team said.

The Trump administration has said that it is focusing on ramped-up economic sanctions and its maritime blockade to attempt to compel Iran to open the Strait of Hormuz and make concessions on its nuclear program.

Front-month West Texas Intermediate crude oil futures rose 2.3% to $85.34 per barrel and front-month Brent crude oil futures added 2.5% to $90.30 a barrel, ICE data showed.

Equity markets across the Asia-Pacific region broadly declined after Fed Chair Kevin Warsh's speech at the Jackson Hole economic policy symposium last Friday lifted prospects for interest-rate increases by the U.S. central bank.

"The main theme was the hawkish repricing of Fed expectations following Fed Chair Kevin Warsh's speech," Commerzbank Research analysts said.

Warsh said he saw little sign that borrowing and lending conditions were restraining the U.S. economy, and that better inflation readings this summer hadn't convinced him the underlying trend was improving.

"We must be confident that underlying inflation is moving to our objective, clearly and at sufficient speed. Otherwise, we have work to do," he said.

Warsh's comments were "more explicit than markets had anticipated and reinforced the view that the Fed remains prepared to resume tightening," the Commerzbank analysts added.

Japan's Nikkei Stock Average fell 0.5%, South Korea's Kospi dropped 0.4%, and Hong Kong's Hang Seng Index declined 0.7%. Also, China's Shanghai Composite shed 0.2% and Taiwan's Taiex was down 1.3%.

U.S. stock-index futures also declined. The eMini Nasdaq 100 futures dropped 0.4%, the eMini S&P 500 futures fell 0.4% and the eMini Dow futures were 0.3% lower.

Yields on Japanese government bonds rose on prospects that the Bank of Japan may not be able to match the pace of likely rate increases by the Fed.

"If the Fed steps up monetary tightening to curb inflation, the environment facing both the BOJ and the JGB market is likely to become more challenging," said Ataru Okumura, chief Japan rates strategist at SMBC Nikko Securities.

"What is currently being priced in is merely a faster pace of reducing the degree of monetary accommodation, rather than a shift toward outright monetary tightening" by the Bank of Japan, Okumura added.

The yield on 10-year JGBs gained 1.5 bps to 2.940% after earlier touching 2.950%, its highest intraday level since Sept. 1996.

Write to Ronnie Harui at ronnie.harui@wsj.com

(END) Dow Jones Newswires

August 31, 2026 01:23 ET (05:23 GMT)