Oil Rises as Growing U.S.-Iran Hostilities Spur Prospects of Prolonged Supply Disruptions — 2nd Update

By Ronnie Harui and Farhan Rafid

Oil prices rose again Wednesday as U.S.-Iran hostilities spurred prospects of prolonged supply disruptions in the Middle East, while government bond yields across much of Asia climbed as higher crude prices intensified inflation concerns and expectations of tighter monetary policy.

The U.S. and Iran exchanged fire for a second consecutive day Tuesday as they continued to fight for control of the Strait of Hormuz, a key waterway through which one-fifth of the world's oil is transported.

President Trump said the U.S. strikes were launched in retaliation against Iran's attempt to place mines in the strait and target American servicemembers in the Middle East over the weekend. He later said on Truth Social that he was not trying to force Iran back to the negotiating table and that he preferred the U.S.'s current position, claiming near-total control of the strait.

Jordan, which hosts U.S. servicemembers in bases across the country, reported engaging 13 ballistic missiles that entered its airspace, The Wall Street Journal reported, citing Jordan's armed forces. Kuwait and Bahrain also reported taking hostile fire.

Oil continues to move through Hormuz, but shipping remains constrained. Trump told reporters on Monday that the U.S. had been helping around 30 ships a night to navigate the waterway, although independent tracking data shows significantly fewer transits, the Wall Street Journal reported. Two tankers carrying Saudi crude were attacked while passing through a U.S.-established transit corridor in the strait, highlighting persistent risks to shipping even as efforts continue to keep the route open.

Current shipping activity in the Persian Gulf also appears insufficient to sustain previous levels of oil exports and flows, ANZ Research said. The renewed U.S. attacks have increased the risk of a longer-lasting interruption to regional supplies, it said.

Front-month Brent crude futures rose 0.6% to $95.23 a barrel in European trading Wednesday, extending a 4.6% surge Tuesday. West Texas Intermediate futures gained 0.2% to $90.38 a barrel, after settling above $90 Tuesday for the first time since late May.

Refined-product markets are also tightening sharply. European diesel refining margins have climbed to their highest levels in at least 15 years as disruption from the Middle East conflict, Russian export restrictions and looming U.S. refinery maintenance squeeze an already tight global market, S&P Global Energy said. In the U.S., Platts assessed Gulf Coast ultra-low-sulfur diesel at a record $4.6973 a gallon on Sept. 1, the highest since the assessment began in 2006.

The yield on Japan's 10-year government bond rose 2 basis points to 3.010% after earlier touching a fresh three-decade high of 3.015%. The yield on Australia's 10-year sovereign securities was up 4 basis points at 5.190% after earlier reaching 5.2111%, the highest intraday level since July 2011, FactSet data showed. Meanwhile, the yield on New Zealand's 10-year government debt reversed gains, falling 2 basis points to 4.7900%, while Australia's 10-year yield climbed above 5.19%. In Europe, Germany's 10-year Bund yield reached its highest level since 2011 and the U.K. 10-year gilt yield climbed to its highest since 2007.

U.S. money markets were pricing a near 70% probability of a Federal Reserve rate increase at its Sept. 16 meeting, up from around 35% before Fed Chairman Kevin Warsh's Jackson Hole remarks, according to LSEG data. The renewed rise in oil prices has added to concerns that inflation could remain elevated, while investors have also been reassessing the outlook for rates following Warsh's hawkish comments.

"Now we are likely to live with higher yields for longer," Vontobel portfolio manager Christian Hantel said, as the global bond selloff continued alongside renewed U.S.-Iran tensions and higher crude prices.

Asian equities were broadly lower Wednesday, with South Korea's Kospi falling 4.0%, Japan's Nikkei Stock Average dropping 2.85% and Hong Kong's Hang Seng Index shedding 0.3%. European equities were mixed in muted early trade, with the Stoxx Europe 600 broadly flat. Germany's DAX fell 0.25% and London's FTSE 100 declined 0.15%, while France's CAC 40 was little changed. Energy-intensive stocks were among the decliners as oil prices climbed, while banks and telecom stocks strengthened.

Write to Ronnie Harui at ronnie.harui@wsj.com and to Farhan Rafid at farhan.rafid@wsj.com

(END) Dow Jones Newswires

September 02, 2026 04:54 ET (08:54 GMT)