Wall Street Wakes Up to $100 Oil

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Wall Street was closed Monday. Oil still moved. Brent climbed toward $100 a barrel. WTI moved above $92. Gold slipped. 

European stocks weakened. And traders kept the chance of a September Fed rate hike near 60%. That leaves U.S. markets with two clear risks when trading resumes Tuesday. Oil is higher. Rates may still rise.

Monday, September 7

Oil was the clearest move Monday. Brent pushed toward $98. WTI moved above $92. Both reached their highest levels in about 6 weeks. Fighting involving the U.S. and Iran kept traders focused on oil supply. Shipping through the Strait of Hormuz has also slowed. 

That matters because the Strait carries a large share of the world’s oil and fuel exports. Any deeper disruption can tighten supply fast. Oil does not need to reach $120 to matter. Near $100, it can already lift fuel and transport costs. That puts more pressure on inflation.

Friday’s jobs report was much stronger than expected. U.S. employers added 162,000 jobs in August. Economists had expected just 56,000. Unemployment held at 4.1%. Participation rose to 61.6%.

Those numbers showed that the labor market remains firm. That gave traders more reason to keep a September rate hike in play. By Monday, the odds remained near 60%. The logic is simple. If jobs stay strong, the Fed has more room to raise rates. If oil keeps climbing, the Fed has another reason to worry about prices. Strong jobs and higher oil are a tough mix for rate-sensitive assets.

Gold slipped Monday. Spot prices fell about 0.4% to $4,410.55 an ounce. U.S. futures lost about 0.5%. Friday’s jobs report was still weighing on the metal. Strong hiring pushed rate-hike odds higher.

That supports bond yields. And higher yields make gold less attractive because gold pays no interest. But gold also has support from the Middle East conflict. That leaves the metal caught between two forces. Higher rates push it down. War risk can pull it up.

European stocks were soft Monday. The STOXX Europe 600 closed near 649.9. Germany’s DAX slipped about 0.2%. Switzerland’s SMI fell about 0.8%. Energy stocks moved the other way. The sector gained about 1.2% as crude climbed.

That split matters. Higher oil helps producers. But it raises costs for airlines, shipping firms, factories and consumers. Fuel gets more expensive. Transport costs rise. Business costs can move higher. That is why rising oil can hurt broad stocks even when energy shares gain.

Last week was about jobs. This week is about prices. The Producer Price Index arrives Thursday, September 10. Consumer inflation follows Friday, September 11.

The Fed meets on September 15–16. That gives markets very little time between the inflation reports and the rate decision. If inflation cools, September hike odds can fall fast. If inflation stays hot, strong jobs give the Fed more room to raise rates. 

Oil makes those reports even more important. If crude stays near $100, investors may start to expect more pressure on fuel, freight and goods prices. That can push Treasury yields higher. It can hurt expensive stocks. And it can keep the dollar firm.

Wall Street reopens Tuesday with several hard numbers in view:

The next move now depends on prices. Jobs were strong. Oil is high. Fed hike odds are still elevated.

If inflation stays hot this week, rates can move higher again. If inflation cools, those odds can fall quickly. Wall Street was closed Monday. Oil was not.

U.S. markets reopen Tuesday with Brent near $100 and the Fed waiting on the inflation numbers.