Crude prices moved higher as traders assessed a string of Houthi strikes against Saudi Arabia alongside the prospect of broader instability across the region. Brent crude, the global oil benchmark, ticked up to $US105.10 a barrel, a gain of 0.4 per cent.
Trading in the greenback edged upward against a basket of leading currencies, while the Australian dollar held its ground despite its tendency to track investor appetite for risk.
Houthi forces carried out a second round of strikes against Saudi Arabia's main airport on Sunday, following an attack the previous day that killed 12 people, with some analysts noting the escalation as a factor that may add strain to energy markets and international shipping lanes. Saudi Arabia's reported backing of a military push near Bab el-Mandeb — a strait through which shipping lanes between Asia and Europe pass — has unfolded alongside a broader uptick in hostilities in the area.
Inflation data expected from both the US and Europe, combined with a run of scheduled speeches from central bank policymakers, had already placed financial markets under scrutiny in the days ahead — a period whose pressures the attacks look set to compound.
Pressure on energy supply chains, if it materialises, has the potential to lift consumer prices and push rate expectations higher — a connection that Nick Twidale, chief market analyst at AT Global Markets in Sydney, drew attention to in client correspondence, noting that geopolitical events tend to carry outsized weight in markets when trading activity is subdued. With a US inflation reading, remarks from several central bank officials, and the opening of another US earnings season all converging in the same week, markets face a notably full schedule of data and commentary to absorb, he noted in a written statement.
With incoming US consumer-price figures and a planned public address by Federal Reserve chair Kevin Warsh both on the calendar this week, market participants are parsing each development for signals about how quickly borrowing costs may continue to rise. An above-forecast inflation reading for September could place upward pressure on interest rates, with bond markets potentially facing renewed selling if the Federal Reserve moves toward a faster pace of monetary tightening.
Yields on 10-year Treasury notes edged toward 5.4 per cent during the previous week — a level not seen since 2002 — while Brent crude holding above $US100 a barrel kept alive market concerns that persistently high energy costs could extend the timeline for inflation to ease.
Stock markets held relatively steady through the period of instability. After touching a record high on Tuesday, the S&P 500 pulled back over the following two sessions amid questions about demand for artificial intelligence, then recovered ground by Friday as market participants looked ahead to what appeared to be a solid round of corporate earnings. The reading sits near its recorded high point.
Market watchers will be looking at whether rising input costs are putting pressure on profit margins at a time when many large companies have been reporting relatively strong earnings. Seven consecutive quarters of double-digit earnings growth now stand on the S&P 500's ledger, and data compiled by a major financial intelligence service underpins analyst forecasts of roughly 25 per cent profit expansion in the third quarter against the same period a year prior.
Four consecutive weeks of gains — the currency's longest such run since early 2025 — left the US dollar moving within a tight band against its main counterparts. Higher oil prices and tensions with Iran drew investors toward safe-haven assets, pushing the dollar upward. Positioning data shows currency traders holding net-long dollar wagers, on the view that the US economy stands on firmer ground than rival economies when absorbing additional rate tightening.
Budget pressures in France, combined with persistently elevated energy costs, pulled the euro to a trough not seen since May 2025 in the prior week, lending the dollar a measure of additional support. Barclays strategists, led by Themistoklis Fiotakis, relayed to clients that a break above the dollar's 15-month trading range appeared increasingly plausible, given stronger US growth relative to peers, limited room for yield compression, and structural vulnerabilities in European fiscal and energy conditions pointing toward further dollar appreciation. Elevated long positioning in the market may place upward pressure on the rally's ability to sustain momentum over the coming weeks.
