Oil Nears $100 As Middle East War Flares

World oil prices rallied on Tuesday, once more closing in on $100 a barrel, and stock markets mostly retreated owing to a flare-up in the Middle East war. The yen spiked as investors ramped up bets on the Bank of Japan hiking interest rates, which dragged down stocks in Tokyo.

“The rise in the oil price has spooked markets, and European equities are lower, along with US equity futures,” said Kathleen Brooks, research director at XTB. “Japan’s Nikkei is the worst performing global (stocks) indexas a rising yen is bad news for Japanese exporters,” she added.

Wall Street reopens Tuesday after a long holiday weekend, with futures contracts indicating a mixed performance.

The yen briefly hit 152.89 against the dollar, within distance of the 152.10 touched in February, before later trading above 154 to the dollar.

Traders are closely watching the greenback and how it reacts to US inflation data due Friday, which could lock in an interest-rate hike from the Federal Reserve this month.

Fresh attacks by Yemen’s Iran-backed Houthi rebels on Saudi Arabia led to the halting of operations at several energy facilities in the kingdom, overshadowing Tehran’s remarks that it was nearing a deal with Oman over shipping through the Strait of Hormuz.

“The market is staring down a Fed hike, a live inflation debate, oil near triple digits, the risk of further Japanese tightening ... (and) renewed tariff threats against Canada” by the US, said analyst Stephen Innes at Quintex Intel.

President Donald Trump on Monday threatened to block US sales of Canadian plane manufacturer Bombardier, alleging “unjust and unfair” bilateral trade provisions as he escalates a tariff war between the neighboring countries, while Canada’s retaliatory tariffs on billions of dollars in US products took effect on Tuesday.

On the corporate front, the share price of pharmaceutical giant Novartis slumped more than 9 percent after the Swiss group said trial results for a treatment for a neurological disease failed to meet expectations.