Oil tops $105 as Houthi attacks on Saudi Arabia raise inflation fears

Oil prices rose in early Asian trading Monday as renewed Houthi attacks on Saudi Arabia heightened concerns about energy supplies and a broader Middle East conflict. The dollar also strengthened slightly as investors sought protection against geopolitical risks.

Brent crude (CO1:COM), the global oil benchmark, gained 0.4% to about $105 a barrel. The dollar edged higher against major currencies, while the Australian dollar was little changed. S&P 500 futures (SPX) advanced after the benchmark index rose 0.6% Friday. Cash Treasury markets were closed for holidays in the United States and Japan.

Saudi Arabia's main airport faced another Houthi attack Sunday, following a strike Saturday that killed 12 people. The escalation raised fears of greater U.S. involvement and further disruptions to international trade. Saudi Arabia also is supporting a counteroffensive near Bab el-Mandeb, a strategic waterway connecting major shipping routes between Asia and Europe.

For investors, the latest attacks threaten to complicate an already challenging outlook for inflation, interest rates and corporate earnings. Prolonged oil prices above $100 a barrel could increase transportation and manufacturing costs, squeeze corporate profit margins and make it harder for central banks to contain inflation. Energy producers may benefit from higher crude prices, while airlines, transportation companies and other fuel-intensive businesses face additional pressure.

Markets are preparing for U.S. and European inflation reports this week, along with remarks from several central bank officials. Federal Reserve Chair Kevin Warsh is scheduled to speak as traders assess the likelihood of further interest-rate increases. A stronger-than-expected September consumer price index could intensify pressure on Treasury bonds and reinforce expectations for tighter monetary policy.

The 10-year Treasury yield (US10Y) approached 5.4% last week, its highest level since 2002, amid concerns that rising energy costs would keep inflation elevated. Nick Twidale, chief market analyst at AT Global Markets in Sydney, warned that geopolitical developments could have an unusually large market impact, particularly with inflation figures, central bank speeches and the start of U.S. earnings season approaching.

U.S. stocks have remained resilient despite the turmoil. The S&P 500 reached a record high Tuesday before retreating on concerns about artificial intelligence demand. The index recovered Friday as investors anticipated another strong quarterly earnings season.

Analysts expect third-quarter earnings to increase approximately 25% from a year earlier, according to Bloomberg Intelligence, extending a streak of seven consecutive quarters of double-digit profit growth.

Meanwhile, the dollar (DXY) is benefiting from safe-haven demand and expectations that the U.S. economy can withstand higher interest rates better than its major trading partners. The currency has risen for four consecutive weeks, its longest winning streak since early 2025. Barclays strategists led by Themistoklis Fiotakis see further potential gains, citing stronger U.S. growth and Europe's fiscal and energy challenges, although heavy speculative positioning could temporarily limit the rally.