Oil Prices Already Tested $100: What Does This Mean for the Global Financial System?

As of this weekend, we're talking about a development that has already occurred, not a speculative scenario. Brent crude rose to $102 on July 23, reaching its highest level since May, before falling back to $99.63 on Friday, while WTI is hovering around $91. So the question is no longer "what happens if oil surpasses $100," but "how will the global system be shaped if this level becomes permanent?"

The triggers behind this movement are clear. The US-Iran conflict has reached its thirteenth night, the Houthis imposed a naval blockade on Saudi Arabia on July 20 and targeted two tankers in the Red Sea, making the Bab el Mandeb Strait, alongside the Strait of Hormuz, at risk. But the reason for Friday's pullback is just as important as the rise: the physical supply loss expected by the markets has not yet occurred; US commercial crude oil inventories unexpectedly increased by 2 million barrels, and Saudi Arabia and the Gulf countries are able to continue their exports via alternative routes. This distinction is critical because while the price rose due to geopolitical fears, the actual supply picture does not yet confirm that fear.

There is a Real Risk on the Inflation Front

Energy costs directly affect the transportation, manufacturing, food, aviation, and chemical sectors. If oil remains permanently above $100, these costs will eventually be reflected in consumer prices. And this coincides precisely with the most sensitive point for the markets, because the Fed's interest rate path remains uncertain. Currently, the possibility of the Fed raising interest rates twice by the end of the year is strongly priced into the money markets; expectations of one hike at the September or October meetings and a second in December have reached 78%. So, while the market was expecting an interest rate cut, a new wave of inflation stemming from oil has completely reversed this expectation.

Implications for Bond and Stock Markets

As inflation expectations rise, long-term bond yields also increase, raising the cost of borrowing for governments and posing a real risk, especially for countries with high public debt. On the stock side, the impact varies significantly across sectors; oil producers, energy companies, and pipeline operators benefit, while airlines, logistics, automotive, and chemical sectors experience cost pressure. Technology stocks, priced with high growth expectations, are also indirectly affected by changes in interest rate expectations.

Two Different Readings for Gold and Crypto

For gold, rising inflation expectations and geopolitical risk perception are normally supportive factors. However, if the dollar and bond yields are also rising simultaneously, gold's reaction can become more complex, which is exactly what is happening now.

On the crypto side, it's important not to draw a one-way line. In a negative scenario, rising inflation, delayed interest rate cuts, and a strengthening dollar put pressure on risky assets. In a positive scenario, some investors may prefer to move to assets with limited supply to counter rising inflation. In other words, Bitcoin's reaction will depend not only on the price of oil, but also on the policy response of central banks to this situation.

Most and Least Affected Countries

Oil-importing economies, such as Turkey, Japan, South Korea, India, and much of Europe, will feel the most pressure. Energy-producing regions in Saudi Arabia, the United Arab Emirates, Norway, Canada, and the US may gain a relatively advantageous position.

In conclusion, oil prices rising above $100 alone do not mean a global crisis, but if this level becomes permanent, it could reshape inflation expectations, central bank policy space, bond yields, and risk appetite. News this weekend that Iran has suspended its retaliatory attacks and the US has not launched attacks for two nights stands out as developments that will determine the answer to this question of permanence in the coming days.

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