Oil Price Stranglehold on Financial Markets Tightens Further
September 14, 2026
The Strait of Hormuz remains all but shut, and now Saudi Arabia’s East-West oil pipeline has been forced to close as well. The Brent and West Texas Intermediate prices of crude oil both jumped slightly more than 4.0% to start this week, increasing the perceived odds that central banks including the Federal Reserve, which reviews policy this week, will be tightening monetary stances. The 3-month Treasury yield at as high today as 4.03% was three-eights of a percentage point about its May low, while a 30-year Treasury yield level of 5.37% is well above levels reached when consumer price inflation peaked in 2022 and their highest since the financial crisis of 2007.
Ten-year sovereign debt yields today have climbed nine basis points in the U.K. and Italy, seven basis points in France, six bps in Spain, 5 bps in Switzerland, 4 bps in the United States and Germany but just a basis point in Japan. Friday’s rebound in U.S. share prices proved short-lived. All the major indices posted losses in the morning, led by the tech-intensive Nasdaq. European stocks are also lower, led by drops of more than 1% in Spain and Italy. Earlier overnight, equities closed up 3.3% in South Korea and 0.9% in India but lower in most other exchanges around the Pac Rim including drops of 0.8% in Japan and 0.7% in Taiwan.
Safe haven-seeking hot money inflows have lifted the dollar by 1.2% against the Mexican peso, 1.0% versus the New Zealand dollar, 0.8% relative to the Aussie dollar and yen, 0.6% vis-a-vis the euro and 0.4% against the Canadian dollar. Gold and silver prices have each fallen more than 2.0%.
Ominous possibilities have stirred up the emotional element in financial market activity. Mankind now faces two existential threats. Like global climate change that President Trump continues to label a hoax, he has adopted a contrarian view regarding the dangers associated with unregulated artificial intelligence. Not strangely, his family wealth continues to benefit enormously from one of the biggest market winners in 2026, namely crypto. An overnight rise of 1.8% in Bitcoin’s price brings its cumulative advance since mid-August to 24%.
Investors are paying keen attention to inflation data of which there were plenty today, both higher and lower.
Finnish consumer price inflation of 2.2% in August represented a 29-month high that contrasted with a low of -0.2% in January.
In India, wholesale price inflation rose 0.2 percentage points to 9.92% in August, almost revisiting June’s 45-month high of 9.97% and up from -0.6% last November. All major components of the WPI — fuel at 22.9%, food at 7.9% and manufactured goods at 8.4% — were more inflationary than in July. Indian consumer price inflation in August meanwhile rose 0.7% on month and by a 20-month high of 4.8% on a year-on-year basis.
The Swiss combined index of producer prices and import prices also climbed 0.7% on month, slashing the year-on-year decline to -0.7% from -2.1% in both June and July and -2.7% earlier this year. Import price inflation swung from -1.5% in July to +0.8% in August.
One of the most successful economies in preserving price stability during this year’s Middle Eastern war has been Sweden where consumer price inflation was merely 0.3% in August after 0.2% in July, 0.7% in June and 0.8% in May.
In Canada where consumer price inflation had touched a 7-month low in February just before the Middle East war began, back-to-back readings of 3.0% were experienced in July and August.
New Zealand’s service sector purchasing managers index of 50.6 in August stayed above the 50 level separating positive from negative growth for a third straight month.
Industrial production in Japan, which had been reported initially to have risen 0.1% in July has been revised to show a 0.2% dip instead, making that the worst result in four months but associated with a 3.9% year-on-year advance compared to the 1.7% increase between the second quarters of 2025 and 2026. Capacity usage in July rose 0.5% on month and 5.4% on year.
Chinese money and credit growth remained sluggish in August. An increase of just 60 billion yuan was well shy of the CNY 590 billion gain in August 2025, and M2 money growth of 7.5% was down from 7.7% in July, 8.0% in June and 8.6% in May.
Britain’s indices of leading and coincident economic indicators in July respectively slipped 0.1% and remained unchanged.
In central banking news, reference interest rates have been left unchanged at 4.25% in Peru and 11.5% in Pakistan. The Peruvian rate was last adjusted a year ago via a cut of 25 basis points, while the State Bank of Pakistan’s policy rate had reversed direction in April when the rate got lifted a percentage point after previously being lowered to 10.5% from a peak of 22% maintained for a year until June 2024. Pakistan’s Monetary Policy Committee “noted that the recent intensification of the prolonged Middle East conflict has led to further increase in already elevated global
commodity prices, while supply chain disruptions have persisted. However, recent domestic macroeconomic data turned out broadly in line with the MPC’s expectations.”
Copyright 2026. Larry Greenberg. All rights reserved.
Tags: Central Reserve Bank of Peru, CPI in Finland and Sweden, State Bank of Pakistan
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