At a Glance:

• Global oil prices pushed closer to $100 a barrel Tuesday as fighting escalated between the US and Iran, unsettling markets worldwide.
• Stock markets mostly fell, with Tokyo hit hardest as the yen surged on expectations of a Bank of Japan rate hike.
• Rising energy costs are adding new pressure on the US Federal Reserve ahead of key inflation data due Friday.
• Corporate news was mixed, with Novartis shares sinking on failed trial results while French AI firm Mistral's valuation soared after a record European funding round.

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World oil prices rose sharply on Tuesday, edging closer to the $100-a-barrel mark, while stock markets broadly declined as renewed conflict in the Middle East rattled global investors.

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Key Statements and Focus Area:

• Market Reaction to Yen Strength: "Japan's Nikkei is the worst-performing global stock index, as a rising yen is bad news for Japanese exporters." — Kathleen Brooks, Research Director, XTB.
• Investor Sentiment on Oil and Conflict: "Investors were spooked by the continued rise in oil prices amid the escalation of hostilities between the US and Iran." — David Morrison, Analyst, Trade Nation.
• Broader Market Pressures: "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." — Stephen Innes, Analyst, Quintex Intel.

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The yen briefly touched 152.89 against the dollar on Tuesday, nearing the 152.10 level hit in February, before later trading above 154, as investors increased bets that the Bank of Japan would raise interest rates. Wall Street's major indices also slipped as traders returned from a three-day holiday weekend to find oil prices climbing, with Brent crude touching $99.46 a barrel before pulling back slightly.

The renewed volatility followed fresh attacks by Yemen's Iran-backed Houthi rebels on Saudi Arabia, which forced several energy facilities in the kingdom to halt operations. The disruption overshadowed separate remarks from Tehran suggesting it was close to reaching an agreement with Oman over shipping access through the Strait of Hormuz. The rising cost of oil is also being felt directly by American consumers, with average diesel prices in the United States hitting a record high on Monday, according to the AAA motorists' association.

Markets are now turning their attention to US inflation data due Friday, which could influence the Federal Reserve's next move on interest rates this month. Adding to the uncertain economic backdrop, trade tensions between the US and Canada intensified after President Donald Trump threatened Monday to block US sales of Canadian plane manufacturer Bombardier, citing what he called unfair bilateral trade terms. Canada's retaliatory tariffs on billions of dollars' worth of US goods took effect the same day.

On the corporate side, shares in Swiss pharmaceutical giant Novartis fell more than 10 percent after the company reported disappointing trial results for a neurological disease treatment. In contrast, French artificial intelligence company Mistral saw its valuation jump to 21 billion euros (around $24 billion) after raising three billion euros in what it described as the largest tech fundraising round in European history. Separately, official data showed China's technology exports surged in August, driven by a global buildout in artificial intelligence infrastructure.

FYI

Tensions between the United States and Iran have simmered for years over issues including Iran's nuclear program, regional proxy conflicts, and sanctions, with periodic flare-ups often sending shockwaves through global energy markets given Iran's proximity to key oil shipping routes like the Strait of Hormuz. The Houthi movement in Yemen, backed by Iran, has repeatedly targeted Saudi energy infrastructure in recent years as part of a broader regional conflict, frequently disrupting oil supply and pushing prices higher. Separately, the US-Canada trade dispute is part of a wider pattern of tariff actions the Trump administration has pursued against multiple trading partners, often citing trade imbalances or specific industry grievances.

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