Brent tops $108 as bond selloff deepens

Summary

Brent crude climbed above $108 a barrel, more than 50% above its July lows, as disruption around the Strait of Hormuz and Red Sea intensified. Asian stocks fell sharply, with Japan’s Nikkei and South Korea’s KOSPI both down more than 2%, while Wall Street futures were little changed. Australian bond yields reached 15-year highs and New Zealand swap rates surged as expectations for further interest-rate rises strengthened.

Equities

The FTSE 100 fell 0.57% to 10,608.92 at Thursday’s close, its fifth consecutive decline and weakest finish since late July. The FTSE 250 dropped 0.92%, extending its losing run to four sessions, as rising oil prices and higher government bond yields weighed on UK shares.

Energy shares provided some support on Thursday as Brent crude traded above $105 a barrel. BP closed 1.4% higher and Shell gained 0.8%, while the wider UK energy sector rose 1%.

Associated British Foods was the biggest faller on the FTSE 100, closing 7.9% lower on Thursday after forecasting a decline in fourth-quarter like-for-like sales at Primark. THG dropped 12.7% after the British e-commerce group warned that new EU import duties were slowing quarterly revenue growth.

Mining shares also came under pressure, with the industrial metals sector falling 4% on Thursday after uncertainty over potential US tariffs on refined copper. HSBC declined more than 1.3% after announcing that chief financial officer Pam Kaur will step down in 2027, while rate-sensitive UK homebuilders fell 2.15% as government bond yields climbed.

US stocks also finished lower on Thursday. The S&P 500 fell 0.58% to 7,591.75, the Nasdaq dropped 0.65% to 26,081.73 and the Dow Jones declined 0.60% to 52,064.10. The S&P 500 has now lost 2% over four sessions, its steepest four-day decline since June.

Nvidia fell 2.3% and Micron Technology dropped 4.7% on Thursday, putting pressure on the S&P 500. Apple moved in the opposite direction, rising 3.6% a day after launching its $1,999 folding iPhone.

American Eagle Outfitters sank 14% to its lowest level since October after maintaining its annual comparable sales forecast amid weaker discretionary spending. Macy’s fell 4.7% despite raising its annual forecasts, with the revised outlook failing to impress investors.

Forex & Commodities

The US dollar held close to its highest level in a week in Asian trading on Friday. The dollar index was broadly unchanged at 99.08, after reaching its highest level since 7 September on Thursday. Against the yen, the dollar slipped to ¥154.1. Sterling was steady at $1.350 and the euro was unchanged at $1.161.

The Australian dollar rose to $0.7167, while the New Zealand dollar strengthened to $0.5827. US producer prices rose 0.4% in August, in line with expectations, after an upwardly revised 0.1% increase in July.

Markets increased expectations of a Federal Reserve rate rise following the data, with futures on Friday pricing a 71.1% probability of a 25-basis-point increase at next week’s meeting, up from 61.2% in the previous session. US consumer price inflation data is due later on Friday.

The yen strengthened slightly on Friday after Japanese wholesale inflation rose 7.6% year on year in August. The Bank of Japan is expected to raise interest rates by 25 basis points next week and could signal faster tightening if inflation pressures continue. The European Central Bank raised interest rates on Thursday for the second time this year.

Spot gold rose 0.8% to $4,352 an ounce on Friday morning but remained nearly 2% lower for the week, putting it on course for a third consecutive weekly decline. Gold had fallen nearly 2% following Thursday’s US producer-price figures and the resulting increase in expectations for higher US interest rates.

Oil prices fell on Friday morning but remained on course for their strongest weekly rise since mid-July. Brent crude dropped 1.9% to $105.6 a barrel, while US West Texas Intermediate fell 1.4% to $101.1. Both benchmarks were still nearly 13% higher for the week after rising more than 6% on Thursday.

Prices reversed earlier gains on Friday after reports that Middle Eastern foreign ministers were seeking a temporary agreement with Iran to manage shipping through the Strait of Hormuz. OPEC on Thursday cut its forecast for 2026 global oil-demand growth to 380,000 barrels per day, its fifth consecutive downward revision. OPEC production also fell by 640,000 barrels per day in August.