The aBP Weekly: Rising Oil Prices Just Made the Fed’s Inflation Fight Harder
Summary
Oil prices became one of the market’s biggest risks this week, with WTI finishing above $100 per barrel as Middle East supply disruptions intensified. Higher energy costs are now feeding directly into the inflation outlook just days before the Federal Reserve’s September meeting.
Inflation remains uncomfortable rather than catastrophic. August producer prices rose 5.4% year over year, while consumer inflation remained elevated, strengthening expectations that the Fed could raise interest rates again.
Higher Treasury yields pressured equity valuations, particularly in growth-sensitive areas of the market. Despite a strong Friday rebound, the S&P 500, Nasdaq and Dow all finished the week lower.
Corporate fundamentals remain an important counterweight. Oracle reported 121% growth in cloud infrastructure revenue and a $664 Bn backlog, providing further evidence that AI infrastructure demand remains exceptionally strong despite a more difficult macroeconomic backdrop.
