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Crude oil prices rose in early trade on Tuesday, as investor jitters over the impact of inflation intensified as many central banks prepared to announce their latest interest rate moves.
International benchmark Brent crude rose for a fourth consecutive session, rising 0.5% to $94.93 a barrel, while U.S. West Texas Intermediate crude rose 1.1% to $92.49 a barrel. Earlier in the day, both benchmarks hit their highest prices in 10 months.
Oil prices rose after news earlier this month that Saudi Arabia and Russia, the world’s two largest oil producers, would extend production cuts until the end of the year.
Traders worry that higher oil prices could hamper efforts by U.S. and European central banks to curb inflation, giving banks more reason to keep interest rates higher for longer despite signs that global economic growth is slowing. The central banks of the United States, the United Kingdom, Switzerland and Japan will meet this week to formulate monetary policy.
In Europe, the Stoxx Europe 600 index fell 0.2% due to losses in health care stocks, France’s Cac 40 index fell 0.3% and Germany’s Dax index fell 0.4%.
China’s benchmark CSI 300 index fell 0.2%, while Hong Kong’s Hang Seng Index rose 0.3%. Japan’s Topix rose 0.1% as markets reopened after the holidays.
The Federal Reserve will announce its latest policy decision on Wednesday, and most market participants are betting that the Fed will stabilize interest rates at the current target range of 5.25% to 5.5%.
However, traders are less sure whether persistent price pressure will prompt U.S. policymakers to raise interest rates again before the end of the year and delay plans to cut rates in 2024.
The latest data on U.S. consumer prices heightened concerns that the Fed’s final push for inflation back to its 2% target may take longer than expected. Rising energy costs pushed the overall August figure above expectations, to 3.7.
“Right now, this game has nothing to do with the actual changes on Wednesday. It has to do with the recommendations in the statement,” said Mike Zigmont, head of trading and research at Harvest Volatility Management. “I’m sticking to the argument that we’re going to stand pat until the Fed tells us something.”
Contracts tracking the tech-heavy Nasdaq index fell 0.1% before the New York open, while contracts tracking Wall Street’s benchmark S&P 500 index were flat.
The Bank of England will hold a policy meeting on Thursday following the Federal Reserve and may raise the benchmark bank interest rate by a quarter of a percentage point to 5.5%. The Bank of Japan is expected to keep interest rates at their current level of minus 0.1% on Friday.
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