Oil Prices Rise, US Stocks Fall Amid Renewed US-Iran Fighting

Oil prices rose on Monday, leading to a drop in US stock futures and putting pressure on bond markets, amid renewed fighting between the United States and Iran.

Brent crude prices jumped over 2.5 percent on Monday, reaching $90.34 per barrel, with futures for September delivery gaining 3.3 percent to trade at $90.99 a barrel. Front-month US West Texas Intermediate crude also saw increases. The price surge followed US forces striking two Iranian rocket launchers on Larak Island. Iran retaliated, marking the first open fire between the two countries since July.

The US-Israeli assault has caused oil prices to spike amid Iran's closure of the vital Strait of Hormuz shipping lane. The Strait of Hormuz is a key energy trade route, with oil flowing from it amounting to 20 percent of the world’s supply. Prices are now lower than at the height of hostilities earlier this year, when crude traded at upwards of $110 per barrel.

The rising oil prices are stoking inflation fears. Wall Street slipped as higher oil prices and hawkish Federal Reserve bets weighed on markets. World shares were mixed in Europe and Asia, and US futures declined on expectations that the US Federal Reserve may respond to inflation. Leo Barincou of Oxford Economics predicted that inflation should remain well above target into next year due to higher gas and food prices.