By Sruthi Shankar and Pete Schroeder
Sept 9 (Reuters) - Brent crude prices surged past $100 a barrel on Wednesday and Wall Street opened lower, as escalating conflict in the Middle East fuelled worries about energy-driven inflation ahead of several major central bank decisions.
Brent crude futures rose as much as 3% to a session high of $100.95, breaching the symbolic price level for the first time since July 24, after Iran said it fired ballistic missiles at a U.S. base in Jordan and both sides claimed
to have attacked vessels, raising worries about oil supplies from the region. Brent crude prices were up 2.83% in early U.S. trading, priced at $100.70 a barrel. [O/R]
Stock markets across the globe came under pressure as the latest surge in energy prices drove concerns that higher inflation will prompt central banks to keep monetary policy tighter for longer.
The Dow Jones Industrial Average was down 0.75% in early trading, while the S&P 500 dropped 0.30% and the Nasdaq Composite fell 0.35%.
The pan-European STOXX 600 index dropped 1.2%, while MSCI's gauge of stocks across the globe fell 3.39 points, or 0.29%. [.EU]
The euro edged higher ahead of the European Central Bank's policy decision on Thursday, with markets widely expecting a hike amid inflationary pressures from the Iran war. The currency rose to a more than one-week high of $1.16493.
The yen strengthened towards the nearly seven-month high touched against the dollar on Tuesday as traders exited short positions in the Japanese currency. Expectations are building for faster Bank of Japan rate hikes and a potential rush of repatriation of Japanese capital.
Both Japan and the euro zone are energy importers.
The dollar index, which measures the greenback against a basket of currencies including the yen and the euro, fell 0.13% to 98.65.
U.S. INFLATION TEST
The 10-year U.S. Treasury yield, the benchmark for global borrowing costs, traded at 4.794%. It touched a near three-year high of 4.818% last week as traders ramped up expectations of a tighter monetary policy.
U.S. producer and consumer price reports, set to be released later this week, are seen as a real test for those bets, with policymakers looking for further evidence that inflation pressures are continuing to cool.
The latest Reuters survey of economists found about 70% expect the Federal Reserve to keep rates steady at its rate-setting meeting next week, but that certainty is below the 90% expectation of steady rates in August.
"Financial markets remain genuinely divided over whether the FOMC will raise rates at next week's September meeting, an unusual state of uncertainty this close to a decision date," said Matthew Ryan, Head of Market Strategy at global financial services firm Ebury.
The yen strengthened around 0.4% to 153.350 per dollar, edging back towards its high of 152.89 from the previous session. It had surged around 4% over the last five sessions, with hawkish comments from BOJ officials ostensibly initiating a move that then snowballed as breaks of key levels triggered additional buying, market players said.
Sterling edged 0.14% higher. The Bank of England is due to announce its latest policy decision on Thursday of next week, with economists predicting the key rate will be on hold for the remainder of this year.
Gold gained 1.5% to around $4,418 an ounce. [GOL/]
(Reporting by Kevin Buckland, Sruthi Shankar and Pete Schroeder; Editing by Toby Chopra, Ros Russell and Chizu Nomiyama )
